CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
Rio Tinto’s (LON, ASX:RIO) $5.4 billion second-stage expansion of its embattled Oyu Tolgoi copper and gold project in Mongolia is once again facing challenges and further delays amid political uncertainty and major changes at operator and Rio’s subsidiary Turquoise Hill (TSX, NYSE:TRQ).
The first to ring alarm bells was Rio Tinto itself, flagging the possibility of US$2.5 billion writedown on the mine during its half-year results delivery last August.
Then came the removal of former Prime Minister Altankhuyag Norov, who was part of the ongoing negotiations between Rio and Mongolia’s government over taxes and costs that have held up progress at Oyu Tolgoi for more than 18 months.
Adding to concerns operator Turquoise Hill said last week that chairman David Klingner and CEO Kay Priesly, both employees of Rio Tinto, would step down from January and December respectively.
Turquoise Hill: End “in-sight”
Delivering its third-quarter results Monday, the Vancouver-based miner said the company and Rio Tinto have made an offer to the government of Mongolia to resolve shareholder matters in a manner the companies believe “is beneficial to all stakeholders.”
Turquoise Hill had some positive figures to share: Net loss attributable to the company fell to $38.6 million, or 2 cents per share, in the quarter ended Sept. 30 from $94 million, or 9 cents per share, a year earlier.
Revenue was about $466 million in the third quarter, compared to only $15.7 million logged a year earlier.
The Canadian firm attributed the improvement to the start of sales from Oyu Tolgoi, expected to become the world’s third-biggest copper mine, and lower operating expenses.
The operation, located about 80 kilometers (50 miles) north of the Chinese border, will contribute about a third of Mongolia’s economy when in full operation, according to Turquoise Hill.
10 Comments
Titus
The view in the article is too pessimistic. The previous Mongolian government was so bad. They were elected on populist platform. They are the reason for the significant slowdown in Mongolian economy. Replacing them is a silver lining in the horizon. It means the Mongolians had enough of bad politics and management.
Bob Down
Mongolia is a basket case! Most corrupt country in the world.
yrvoyss
This is a very irresponsible journalism through an inflamatory headline. The mid-caption “Turquoise Hill: End “in-sight” would have been far more appropriate in the circumstances.
TRQ has finally submitted a proposal. That’s progress, not another setback. Foreign investment in Mongolia in down almost 70% this year, with huge political and economic implications as the world watches the TRQ situation. Mongolia has even more reasons now to strike a deal.
Key people on both sides of the table have been removed: the Prime Minister of Mongolia and the Chief Executive of TRQ. That could be viewed as removing the people responsible for the current impasse, and moving towards reconciliation and getting a deal done.
The Mongolian authorities have publicly announced that the issues were resolved on several occasions, only to hear from TRQ later that there are still outstanding issues. If TRQ says the end is in sight, that’s worth something.
Honheree
Bileg,
According to Transparency International, you are correct. Mongolia is only the 83rd most corrupt country, out of 175, just below Liberia, which moved to a higher, less corrupt ranking, while Mongolia has moved down. Mongolia’s friend, North Korea, at 175th is the most corrupt country.
This corruption, preventing investment in mining, is increasing (apparently by bureaucrats, who do not realize foreigners see through the corrupt manipulations of laws in attempts to make themselves and friends rich through bribery and corruption).
As an example, with the new Mineral Law, if I do careful research, and through my efforts find a new area that has great promise, in Mongolia, I cannot apply for an exploration licence, with my company, and receive it IMMEDIATELY, as in western countries (in only one hour in some western jurisdictions) .
In Mongolia, an ‘special’ MRAM committee looks at my application, sends it to their friends, who go out and look at this new area, and find, also, that it has great potential. The area is then put up for bid, the committee tells their friends my company’s bid, and their friends make a slightly higher bid and corruptly win the licence. After TWO MONTHS, I find… no surprise….. after my personal effort I have lost the bid.
And Mongolians wonder why companies do not invest in Mongolia.
Which Mongolian Minister was it, who boasted, in January, 2014, that Mongolia would have a 17% growth in 2014? I said then, not the way it does business!!
I have even talked to investors about investing in Mongolia. They just laughed and said, “are you kidding? The Mongolians invite you to there, wait until you find something then make laws or make false accusations to steal your mining licence, or take it for next to nothing, despite all the efforts and money invested by shareholders.” That is what they have been trying to do with Oyu Tolgoi.
Increasingly, fewer and fewer groups will invest in Mongolia, and those who do and get burned, will inform others and even less and less will invest. That is except Mongolia’s neighbors to the south, who have a long term, strategic, political aim. They already have, quietly, gained control of most of the exploration licences anyway!!
That is Mongolia’s future due to its own corruption. Stop teaching English in schools, start teaching Mandarin!
Bob Down
By the way Hunnu Air just cancelled their Hong Kong to UB flights, its only MIAT now, and not everyday. Things will get worse for Mongolia before they get better.
Ikh
It is easy to point the finger at the government, but who elects the government? Ultimately, people get the governance they deserve. Elected representatives have more in common with the mafia than civil servants.
The term ‘democracy’ is widely used in Mongolia, but it is poorly understood. Rather than the populace opting for what is best for the majority, Mongolians are busy looking out only for number one. Mongolia is not a democracy, but anarchy with Cleptocratic overtones.
And even if the government ‘gets it right’ eventually, there is a stratum of Soviet era regulators, fueled by ignorance and greed, to contend with. This frustrates
investors, but is also a risk to individuals brave enough to enter this regulatory wilderness.
There are currently more than 50 foreigners in detention or being prevented for leaving Mongolia for ‘crimes’ that would not even be reportable in civilized societies.
Mongolians are primitive, deceitful and dangerous. Enter this Land that Time forgot at own risk!
jade
pc
jade
pc
Bob Down
Jade, without mining, Mongolia will be doomed. You have many people living in the Ger district of UB, they have no running water, no proper sewerage. They have no jobs, some will die this winter from the cold. But still the rich Mongolians dine out in downtown UB, they made their money from corruption, they dont care about the other Mongolians. Vary sad story.
jade
peace