Mongolia heads for take-off

Mining Journal

Sardorbek Koshnazarov
Oct, 2009

Mongolia, a resource-rich country positioned between Russia and China, was hit hard by the recent global economic downturn as prices for the major export commodities, in particular copper, plunged substantially. Income from mineral exports declined significantly, resulting in a widening budget deficit, reduced foreign exchange reserves and weaker national currency. These factors, combined with domestic pressure, pushed the Mongolian government to speed up the signing of big mining deals – in particular, Ivanhoe Mines Ltd’s flagship Oyu Tolgoi copper-gold project – and work towards bringing substantial foreign investment into the country. This saw the government, Ivanhoe Mines and its project partner Rio Tinto sign the long-awaited investment agreement on October 6. Earlier in the year, the Mongolian parliament decided to repeal the controversial 68% windfall tax on copper and gold, much to the delight of the investment community, clearing the final hurdle for the Oyu Tolgoi investment agreement. The cash-strapped, yet resource-abundant, nation is likely to launch multi-billion-dollar resource projects in the next few years, which will create investment opportunities for both strategic and portfolio investors. It should also stimulate one of the fastest rates of economic growth in the world...