Mongolia Bows to Pressure From IMF, Mining Majors
Multinational mining companies are ready to return to Mongolia in a big way now that the country has opened up vast new lands for exploration and eased regulatory and tax burdens for foreign investors.
The government’s reversal of a regulation forcing foreign mining companies to funnel revenues through domestic banks and other recent decisions were encouraging, Xanadu Mines chief executive Andrew Stewart told CNBC, showing “its firm commitment to really get the foreign investments going.”
Xanadu operates the Kharmagtai copper and gold project in Omnogovi (South Gobi) province, an area with extensive foreign-owned mining interests.
The government moved to reverse the banking rule early this month when the International Monetary Fund postponed the start of a $5.5 billion bailout after a complaint from mining giant Rio Tinto.
The UK-headquartered Rio Tinto is the biggest investor in Mongolia and majority owner of the Oyu Tolgoi copper and gold mine, Nikkei Asian Review wrote.
The government more than doubled the amount of land available for mineral exploration to nearly 21 percent after securing agreement from the IMF and other lenders for the bailout package, which includes a $425 million IMF loan.
“Without the grant from the IMF Mongolia can’t move forward,” said Khayankhyarvaa Damdin, head of the ruling Mongolian People Party’s parliamentary caucus.
“Because the economy is in a dire state, Mongolia first needs to be part of the grant, after that we will discuss whether foreign investment should go through a Mongolian bank,” Nikkei Asian Review quotes Damdin as saying.
Mining accounts for some 25 percent of Mongolia’s GDP and 80 percent of its exports, CNBC says.
The expansion of land available for prospecting should allow greater exploitation of the country’s coal and copper reserves, both ranked in the top 15 worldwide, according to Mining Technology.
After the boom years at the turn of the century when its economy grew at double-digit pace, slumping global commodity prices and the government’s vacillating attitude toward foreign investment drastically affected budget revenues.
Compiled by Ky Krauthamer