Canadian firms seals Mongolian mining deal

Canadian mining firm Ivanhoe Mining has partnered with Anglo-Australian mining group Rio Tinto to develop the Oyu Tolgoi copper-gold prospect in Mongolia. At a ceremony today in MongoliaÔÇÖs capital Ulan Bator, the two companies and the Mongolian government signed the long-awaited $4 billion investment agreement, allowing the development phase at the mine to commence.  Production at the site is expected to start in 2013, with full production capacity five years later predicted to reach 450,000 tonnes of copper and 330,000 ounces of gold per annum, over a period of around 35 years. Ranked as one of the largest copper finds in the world, the site is estimated by geologists to contain a total 21 million ounces of gold and 17 million tonnes of copper.  The mine is located in the south Gobi desert about 80 kilometres north of the Chinese border, and is expected to provide around 3,000 jobs, as well as thousands more along the supply chain, boosting the nationÔÇÖs total employment rate by more than 10 percent. The deal, which has been six years in the making, represents one of the biggest investments in Mongolia since its shift from communism to capitalism 20 years ago, and is a welcome boost to the economy of one of AsiaÔÇÖs poorest nations. MongoliaÔÇÖs GDP is expected to increase by almost 35 percent over the life of the mine, with per capita disposable income expected to rise by almost 12 percent. Mining is the backbone of MongoliaÔÇÖs economy, accounting for around 30 percent of GDP and 70 percent of exports. Vancouver-based Ivanhoe began exploring the mine nine years ago and gained mining licenses three years later. The company spent $156 million on exploration and development at the site last year, and $245.5 million in 2007. In a statement, Ivanhoe said the agreement ÔÇ£establishes a legal, stable, long-term tax and regulatory environment for the construction and operation of the Oyu Tolgoi mining complex.ÔÇØ┬á  Talks preceding the deal moved slowly due to negotiations over how big a share the Mongolian government should take; eventually, it was awarded 34 percent equity interest. In August, it agreed to waive a 68 percent windfall tax on copper and gold sales, effective from 2011. It is widely expected that the deal will now encourage further investment in Mongolia, due to the countryÔÇÖs rich copper, gold, silver, oil and uranium deposits. Mining firms and consortiums from Russia, South Korea, the US and China have already submitted bids to develop MongoliaÔÇÖs Tavan Tolgoi, the largest untapped coal field in the world. Production from Oyu Tolgoi will make Ivanhoe a major producer of copper. * ┬á┬á┬á┬á┬á┬á┬á*┬á┬á┬á┬á┬á┬á┬á *