Will there be yet another delay in ratification of Oyu Tolgoi agreement?

Despite a commitment by President-Elect Tskakhiagiin Elbegdorj to get Mongolians more money from the Oyu Tolgoi draft investment agreement, Ivanhoe officials are confident Elbegdorj does support development of the huge copper-gold project.

RENO, NV - 

Although a Bloomberg interview with Mongolia President-Elect Tsakhiagiin Elbegdorj caused shares of Ivanhoe Mines to decline, Ivanhoe officials are waiting to hear Elbegdorj's inaugural address before they react.

In an interview with Bloomberg, Elbegdorj said he does not support having the Mongolian Government buy an equity stake in the massive Rio Tinto/Ivanhoe Mines Oyu Tolgoi copper gold project.

Elbegdorj, who attended the Colorado School of Mines prior to graduating from Harvard University, won election on campaign promises which stressed obtaining a greater share of the country's mineral wealth for individual Mongolians.

A former prime minister of Mongolia, Elbegdorj could delay the already long overdue ratification of the Oyu Tolgoi draft investment agreement.  Elbegdorj assured Mongolians that the nation's mineral wealth would be distributed among them, not taken by foreign mining companies. One-third of Mongolians live under the poverty line with an average income in 2008 of $1,700.

The Oyu Tolgoi agreement is being considered a blueprint for future negotiations with foreign mining companies wishing to mine in Mongolia.

In his Bloomberg interview, Elbegdorj said he feels the government should take 50% of Oyu Tolgoi's profits, presumably through a similar taxation and royalty system favored by western governments.

Elbegdorj said reaching an agreement on Oyu Tolgoi his "first priority" economically. "This agreement is the first agreement. If we make a good agreement, this will be an example for exploiting other big deposits and there is no space to make mistakes."

The president-elect also told Bloomberg that the government may consider changing a 2006 windfall profit tax that imposes a rate a 68% on revenue when copper prices exceed a certain price per tonne. Instead, Elbegdorj suggested a graduated system. "I think one big high rate is not very wise."

However, Ivanhoe Mines is waiting until the new president gives his inauguration speech rather than react to the Bloomberg interview. Investors are being less patient as Ivanhoe's stock fell 7% Wednesday. 

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