Decision time approaches for Mongolia, Rio Tinto and Turquoise Hill on Oyu Tolgoi, the enormous copper mining project that could one day represent about a third of the landlocked nation’s economy.
Since we reported that Mongolia’s yet to be created sovereign wealth fund could take an equity stake in Turquoise (which releases earnings after the close in Toronto on Tuesday), one deadline has been extended, the mining minister has done his best to wind up investors, China has reasserted itself and Tony Blair has popped up.
All of which means that a deal to start work on the underground part of the mine (phase II), funded by $4bn of loans by commercial banks and multilateral lenders, is very close. But it remains caught up in Mongolian politics, and may not hit the March 31 deadline on which the funding hangs. Read more
Warning! Read the boiler plate here
What follows concerns the likely actions of the government in Ulaanbaatar, which is pretty much the definition of a frontier market and all the perils that go with it. With that warning, come with us to Mongolia.
What we hear, from sources with a record of reliability, is that the government is strongly considering the purchase of a small stake in Turquoise Hill, the mining company controlled by Rio Tinto. Read more
Oh dear, Mongolia’s new dollar bonds “tentatively nicknamed Genghis Bonds” (h/t Katie Martin) have been hit by some shocking, hard to predict, political instability.
One of the members of Mongolia’s fragile coalition government has ordered its ministers to leave their posts, a move that has sent the country’s bonds into a tailspin and could threaten the passage of crucial legislation.
Once it was a ‘Developed’ economy, for investment purposes. Then it stepped down to become ‘Advanced Emerging’ (unintuitively), before becoming plain ‘Secondary Emerging.’ Next came relegation to ‘Frontier’ (‘wild’, rather than ‘new’). And now this… Read more
Remember when Vale and BHP, two of the world’s biggest iron ore miners, changed their pricing contract methods with China and Japan?
The move from annual to quarterly contracts came amid resurging Chinese demand for iron ore, which put the miners in a powerful position. Read more
The government of Mongolia has backed down from its demand for a larger share of Oyu Tolgoi, one of the world’s biggest new copper mines, in an about-turn that boosted the share price of Rio Tinto, the FT reports. In a joint statement, the Mongolian government, Rio and Ivanhoe Mines – Rio’s joint venture partner – said the three parties had “reaffirmed their continued support” for the 2009 Oyu Tolgoi Investment Agreement, a contract that started a mining boom in copper and coal-rich Mongolia. The statement ended two tense weeks for investors, who are increasingly seeing resource-rich countries attempt to raise taxes on miners and claim larger stakes in top projects.
The government of Mongolia is seeking a bigger stake in Oyu Tolgoi, the biggest undeveloped copper mine in the world, the FT reports, in a surprise move that underlines the challenges ahead for Rio Tinto and Ivanhoe Mines as they develop the country’s flagship mining project. The government of Mongolia has asked to reopen discussions over the 2009 investment agreement for Oyu Tolgoi, a project widely considered to be a litmus test for future mining developments, following mounting pressure from parliamentarians and environmentalists. Meanwhile commodities companies which were expected to invest billions of dollars in Zambia’s mining sector over the next five years, including Glencore, First Quantum, Barrick Gold and Vale, are wary that the country’s new president, Michael Sata, may put past threats against foreign investors into practice now that he has been elected, the FT reports separately.
Mongolia has announced the winners of a long-fought contest to develop part of Tavan Tolgoi, one of the largest coking coal deposits in the world. The FT reports that in a nod to the steelmaking needs of neighbouring China, Chinese coal miner Shenhua will own the lion’s share of the venture with a 40 per cent stake. A Russian-Mongolian consortium will own a further 36 per cent. Peabody, the biggest US coal miner, will have 24 per cent. The tender process was hotly contested by three of the world’s largest resources companies: Brazil-listed Vale and London-listed Xstrata and ArcelorMittal.
Thousands of ethnic Mongolians have protested this week outside government offices in the northern Chinese province of Inner Mongolia, in a rare show of defiance in the normally peaceful region, writes the FT. About 2,000 Mongolian students in the remote city of Xilinhot joined the peaceful protest on Wednesday, according to a US-based human rights group, photographs and accounts posted on the internet. The protest was sparked by allegations that a Chinese truck driver intentionally ran over a Mongolian herder on May 10, killing him.
Mongolia plans to issue its first sovereign bonds this month, marking a milestone for capital markets in this resource-rich democracy. The newly created Development Bank of Mongolia will issue $700m in sovereign bonds to fund lending programmes, Chuluundorj Khashchuluun, chairman of the national development and innovation committee, told the FT.
Tensions are rising between Rio Tinto and Canada’s Ivanhoe Mines over rights to a world-class copper deposit in Mongolia as the multinational mining group releases hundreds of millions of dollars to develop the mine over which it has limited control. Ivanhoe, a Vancouver-based mining company that owns Mongolia’s Oyu Tolgoi project, on Monday vowed it would defend a scheme which it believes protects shareholders against unfair takeovers, but Rio believes is a violation of its rights. The FT said Rio believes the agreement limits its long-term options, as it discusses methods of developing the project including bringing in Chinalco, the Chinese state-owned mining company that is Rio’s largest shareholder.
Rio Tinto has ended months of speculation by confirming plans to swap its shares in Ivanhoe Mines for a direct stake in Mongolia’s Oyu Tolgoi copper and gold project, which is 66 per cent owned by the Canadian miner, the FT reports. Rio owns an indirect interest in Oyu Tolgoi, one of the world’s largest undeveloped copper deposits, through its 29.6 per cent stake in Ivanhoe.
Golomt, for the uninitiated, is a Mongolian bank whose CEO announced plans on Friday to make an IPO abroad between 2012 and 2013. Hong Kong is favoured, according to a (Chinese) Reuters interview.
Yes, that’s right, Mongolia — whose stock exchange’s Top 20 index is one of the world’s best-performing. Emerging market equities: it’s a brave new world. Read more