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Government of Mongolia may reject the 34% share in Oyu Tolgoi

Standing Committee on Economy under the Parliament convened on Wednesday, November 20 to discuss the Parliament’s draft resolution “on securing Mongolia’s interests in Oyu Tolgoi mine operation” and decided to submit it for Parliament review. Among the seven clauses contained in the draft resolution, the Government was assigned: 1) to take comprehensive actions in accordance with Mongolian laws and regulations to improve Oyu Tolgoi’s Investment Agreement signed in 2009 and the Shareholders’ Agreement signed in 2011; 2) in this regard, to obtain independent and internationally accepted consultancy services; and 3) to improve the 2015 Oyu Tolgoi underground mine development and financing plan signed in 2015 in alignment with Mongolia’s interests and relevant laws and regulations. 

This means that the Parliament is deciding against canceling the agreements related to Oyu Tolgoi as an initial step. The Parliament is likely to review and pass the resolution within this week.

Furthermore, the Government was tasked to seek options to replace Oyu Tolgoi’s 34% share currently owned by the GoM with either production sharing or royalty, and present to the Parliament. This represents the first step of the Government in rejecting its 34% share in Oyu Tolgoi. Some Mongolian politicians and the public have historically contested the share, accusing it of putting the country in debt. 

Parliament member B. Battumur, Parliament’s head of working group on developing the said draft, said “Oyu Tolgoi is importing electricity from China worth 200 million USD each year. Due to high-interest loan – nearly nine percent - from 15 major global banks to finance the project, Mongolia’s slice of the pie is shrinking”, thus, highlighting the need to improve the agreements in question. 

This means that the Parliament is deciding against canceling the agreements related to Oyu Tolgoi as an initial step. The Parliament is likely to review and pass the resolution within this week.

In addition, the Standing Committee on National Security of Mongolia met on Tuesday, November 19 and discussed issues related to the Oyu Tolgoi project. Interior Minister Ts. Nyamdorj announced today that the Standing Committee on National Security has viewed it unnecessary to cancel OT’s agreements and stop the project. 

“Oyu Tolgoi’s shareholders expressed that they would seek arbitration from the London court if the Parties fail to reach an agreement on the issue. Oyu Tolgoi Investment Agreement is a negotiation agreed to by the Government of Mongolia hand-in-hand by the Parliament and the President. This is Mongolia’s problem. Therefore, the question of whether the Mongolian party has indeed fulfilled its contractual obligation will come up at the court. I think it’s crucial to continue Oyu Tolgoi project”, said Minister Ts. Nyamdorj.

 



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