BOLD-ERENE.S Aside from glorifying the PM OyunErdene.L, the dispute over the past two years and uncertainties surrounding Oyu Tolgoi that dragged on for 12 years seem to be coming to an end. Underground mining has started. It is already said and done. Can’t be stopped for at least 50 years. Therefore, it can be understood that the problem has been resolved as a result of mutual understanding by identifying the shortcomings of the past. The debts are written off. In other words, we are far from looking back to complain and debate over the past. Now it is time to look to the future, focus on creating real economic growth along with Oyu Tolgoi and make it beneficial to every citizen.
Inaugurating the underground mine, Prime Minister Oyun-Erdene.L and Rio Tinto’s CEO Jakob Stausholm have ordered the first blasting of the Oyu Tolgoi underground mine. In his opening remarks, Prime Minister Oyun-Erdene.L made two things very clear. His words seemed to mean that we should end the past quarrel and look to the future without making any more mistakes. First of all, the Mongolian people and the government have put their trust in the investor once again, which perhaps could be their last hope for the project, and left the operations at their hands with a hint of warning to finish it on time. The CEO of Rio Tinto Copper Bold.B responded by saying that he was aware of the fact that the time had come to complete the work promptly and to put the underground mine into full operation on time. Compared to the beginning, when we were worried about how to build a 200 km long tunnel, we are close to mining our first ore now that has built about 70 km at the expense of about USD 10 billion. Just a few years ago, we were worried about how to develop the mine without making mistakes, but today, thanks to the efforts of thousands of Mongolian workers and engineers, 90 percent of the work has been done.
If we look at the history of Oyu Tolgoi, we can see very interesting patterns. Every dispute between the government and Rio Tinto was linked to the economic crisis and recovery. When the Investment Agreement was first signed, Mongolia was looking for a way out of the deep global recession. Exploiting the existing deposits in cooperation with foreign investors was the only option for a country with an empty treasury and where two commercial banks just went into bankruptcy. Indeed, Tavan Tolgoi would not be very successful if Oyu Tolgoi was developed together with Rio Tinto. But within three years after signing the Oyu Tolgoi agreement, the country saw a high level of economic growth, huge foreign exchange inflows, and rapidly expanding businesses, all visible in the statistics.
Then came the second deep crisis caused by the balance of payment in 18 months between 2013 and 2015. When the price of coal was less than USD 30 per tonne and the financing from the Chinggis bond was being used up, an agreement was reached to start and finance the Oyu Tolgoi underground mine. After several disputes between the parties, the underground development was initiated at a mutually beneficial time. The preliminary study showed a fairly positive benefit for Mongolia, including an annual investment of USD 1.2 billion, the creation of at least 50,000 jobs, and the resumption of over 1,000 businesses. This was the third crisis. The economic blow from the pandemic was a factor for the Mongolian government to negotiate with investors and start the mining operations of the underground mine of Oyu Tolgoi. Having the investor write off the previous debt and avoiding involvement in the additional financing of USD 1.4 billion, Mongolia will be able to generate at least USD 20 billion in export revenue and MNT 20 trillion in tax revenue over the next 10 years. During the two years of the pandemic, the Prime Minister has been scratching his head amid a pile of problems as businesses closed and border restrictions stagnated the economy.
With a promise of pulling the economy out of crisis and creating new growth, the PM is negotiating with its largest investor and stepping up its biggest project.
The implicit words highlighted by Prime Minister Oyun-Erdene.L is also related to this. In addition to reaffirming to the world that Mongolia can negotiate and cooperate with foreign businesses and investors in a mutually beneficial manner, he called for investors to enter the next projects by saying the country is ready to enter mutually beneficial partnerships.
The deal with Rio Tinto attracted the attention of investors. At a time when the global stock market has been in turmoil for several days, the shares of four Mongolian companies are rising.
The Oyu Tolgoi issue is not just a matter of one company but is a steady backbone for all Mongolian companies and businesses.
The investors’ welcoming hand over the settlement of the Oyu Tolgoi dispute will not last long. Former Prime Minister Saikhanbileg.Ch once said, “Mongolia is back in business.” It is true that at that time, stock prices and the bond market were rising and investors were applauding. But it is also true that Mongolia has not been able to take full advantage of that cycle. Whether to repeat the mistakes of six years ago or to seize the moment as quickly and as much as possible, depends on the ability of OyunErdene.L’s government.
The authorities will have to get their priorities straight. To sit in the middle of the four mountains or to look for opportunities around the world. May their decisions be wise. Thousands of Mongolian businesses and investment projects are seeking government leadership and policy support. Therefore, it seems that it is time to maintain the results we have achieved discover the next Oyu Tolgoi, and offer attractive deals for large investments.
Mining Insight Magazine, January 2022
