Mongolians could have a stake in one of world’s largest copper mines

Mongolia owns 34% of Oyu Tolgoi located in the South Gobi desert and the government of the Asian nation has been at loggerheads with Turquoise Hill, which owns the remainder of the mine, for months.

According to the sources quoted by Bloomberg, the government’s move to give Mongolians shares in the massive mine cold make the negotiations with Rio Tinto easier, as citizens have complained the project only benefits foreign investors.

Once Oyu Tolgoi goes into full operation, is set to increase the country’s GDP by at least a third, bringing prosperity to a nation where many people still live in simple yurts and huts.

But in practice, writes German weekly Der Spiegel‘s columnist Bernhard Zand, the deal looks quite different:

Here we have a weak country that needs the help of a business that is economically far more advanced to tap its own natural resources. One side has raw materials everyone wants; the other has the necessary technical expertise, as well as a great deal of money and smart lawyers. How can the inexperienced country benefit from this relationship without being taken advantage of? And how can the government of this frail democracy explain to its people that in the coming boom years, a few people will get rich very quickly, while most stay poor?

The Asian nation has twice held up shipments from the mine, due to disagreements over Oyu Tolgoi’s expansion, which Turquoise Hill (then Ivanhoe Mines) has been advancing for more than a decade.

Those differences, together with cost overruns, employment and pay of Mongolian workers, contractors and corporate governance, taxation and the repatriation of earnings, remain sticking points.

At full tilt, Oyu Tolgoi is set to produce more than 1.2 billion pounds of copper worth over $4 billion at today’s prices, 650,000 ounces of gold ($800 million) and 3 million ounces of silver (under $100 million) each year.

Image of Mongolian boys courtesy of the United Nations via Flickr