www.unuudur.com » Mongolia premier pledges to end Tavan Tolgoi coal mine impasse

Mongolia premier pledges to end Tavan Tolgoi coal mine impasse

[Нийтэлсэн: 15:54 04.07.2015 ]

www.ft.com

Mongolia will “in the very near future” end an impasse over investment in a $5bn coal mine and push forward “Steppe Road” infrastructure plans with Russia and China, the prime minister has said as he seeks to shore up investor support for his country’s flagging economy.

Saikhanbileg Chimed also indicated that Mongolia planned to launch another sovereign bond as the country seeks to get “back to business” following two years of slowing growth in gross domestic product, plummeting foreign direct investment and rating agency downgrades of its junk-rated “Chinggis” bonds.

Official approval for investors to start work on the Tavan Tolgoi (TT) coking coal mine in the Gobi desert should follow soon after a review of the investor agreement in parliament this month, Mr Saikhanbileg told the Financial Times in an interview. Investors in the project include China’s Shenhua Energy and Japan’s Sumitomo Corp.

“TT will be unlocked in the very near future,” he said.

Several members of Mongolia’s parliament have raised objections to financial and legal aspects of the TT investor agreement, raising the possibility that the mine — which has estimated reserves of 6bn tonnes — could suffer a similar fate to that of Oyu Tolgoi, a $5bn copper mine, where an expansion project was unblocked in May only after two years of wrangling.

Lack of progress by Rio Tinto, the owner and operator of Oyu Tolgoi, in reaching an accord with Ulan Bator on the expansion highlighted investor concerns about the level of political backing for investment.

This year, Mongolia resorted to a mobile phone referendum to shore up public support for the project. But Mr Saikhanbileg said there would be “no need” to deploy the same tactic to get the TT project under way. “I am confident [it will be approved],” he said.

A 220km rail line from the mine into China, and a potential 1,300km rail line eastward to markets in Japan and the US, are also planned, Mr Saikhanbileg said.

The prime minister, who took power last November with a mandate to put Mongolia’s economic house in order, said the government was seeking to build a “very friendly business environment” by giving foreign companies the same regulatory treatment as local counterparts and freezing a 10 per cent corporate tax rate for up to 22.5 years for large inward investors.

His aim is to reverse a drop in foreign direct investment inflows, which fell to $0.85bn last year, down from $2.29bn in 2013 and $4.4bn in 2012. The decline has helped depress Mongolia’s foreign exchange reserves to $1.2bn, raising concerns it may have insufficient funds to repay $1.08bn in sovereign bonds that come due in January 2018.

However, Mr Saikhanbileg did not see a swift rebound in FDI inflows to 2012 levels, saying that this year would remain “very challenging”. He was hopeful that tax stability and the mining measures would see FDI bounce back.

Asked about plans to issue another Chinggis bond, Mr Saikhanbileg said he could not talk about the details for legal reasons. “We will announce it when the time comes,” he added.

Improved relations with China following the visit last year of Xi Jinping, the Chinese president, figure strongly in Ulan Bator’s strategy to attract investment and avoid a potential default on its international bonds.

A proposed $50bn “Steppe Road” project to build a 997km highway and a 1,100km electrified railway connecting China and Russia through Mongolia would receive a boost this month when leaders of China, Russia and Mongolia met at the Shanghai Co-operation Organisation summit in Ufa, Russia, Mr Saikhanbileg said.

Mongolia was open to financing from the China Development Bank, the China Ex-Im Bank and the China-led Asia Infrastructure Investment Bank as it implemented plans to strengthen infrastructure, he added.

James Kynge and James Wilson in London

 



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