As of August 30, 2013, the stock price $45.11 ( NYSE)
Rio Tinto's unit Turquoise Hill Resources LTD. operates a copper-gold mine in Mongolia's Gobi region, a huge project with two stages. Oyutolgoi is the name of the mine (or the location), given by the locals due to its rich appearances of a mineral called "malachite. "Oyu" is the Mongolian word for malachite, a stone (mineral) of green color, used as both an ornamental stone and as a gemstone. Malachite presence is typically associated with copper deposits, and so was this mine discovered, not far from the border of Mongolia and China. "Tolgoi" is the Mongolian word for "hill". So the name "Oyutolgoi" would be translated as "Malachite Hill".
|Mongolian style hat looks good on Robert Friedland|
According to one of the three Mongolian board directors , Tsagaan Puntsag, who is planning to resign soon, the project financing conditions for the second stage of the mine must be unacceptable for Mongolia.
There seem to be other issues both parties, Rio Tinto and Mongolia, could not be agreed on yet, like royalty dispute, tax and cost overruns. With that higher costs, Rio Tinto will exceed the amount of overall cost in the end, and that would be a violation of the agreement signed by both sides. It must be a reasonable explanation about how and why the costs run so high but Rio Tinto seems to be very reluctant to be cooperative or open to its partner. Mongolia, as 34% owner of the mine, has also a point of view to be considered, and it is unacceptable if Rio Tinto wants to force an unacceptable condition to be accepted by the "host" country.
As mentioned above, he said that there are unacceptable conditions included in the options of financing for the second phase of mining. He also said that Rio Tinto plays the role of double-faced partner. They (Rio Tinto) seem to pretend to be an honest and fair partner to Mongolia, saying they care about this joint business and being successful for both sides, but at the same time don't bother to send a wrong message out there saying that Mongolia is the "bad guy" with whom nobody should do business with. What the hell?!
That is Rio Tinto 's strategy: to scare away any potential foreign investors and be the only guy Mongolia has to have a "sex" with, because Mongolia has no other choice! A mining of this kind of huge capacity and investment is crucial to Mongolia's economy ( it is a question of up and down) and that is why Mongolian government should be forced to accept any terms and conditions Rio is pushing. I don't think Mr.Tsagaan is lying, and why should he? He said that is why we should play the same game with Rio. That's right!
He even compared Rio with somebody who went fishing with Mongolia on the same boat and while trying to gain a favorable situation like using a bigger fishnet or disturbing his partner's effort to catch a fish by slapping his hand, he manages badmouthing his partner (Mongolia) to the other "fishermen" passing by in their boats. If the situation between Rio and Mongolia looks just like Mr.Tsagaan has described, then is there any good reason why we should do business further with this company?
Both parties should stick to the agreement they signed, and any changes must be consensus based. Now it seems like Rio wants to "rape" Mongolia against its will, and that is not fair. "Consensus sex" is OK! Mocking Mongolia and treating it as if forcing a child to do something, will lead to nothing but turning the Mongolian people against itself and hurting its reputation. We say yes for going forward with this project as long as it is fair and profitable for both sides. But if Rio thinks that they can use a pressure by shutting down the project or laying off thousands of workers by suspending operations halfway, to force Mongolia to agree on that for Mongolia unfavorable situation, they are mistaken. Oyutolgoi is not our only life, you know what I am saying? We have and will have many "Oyutolgois". We can go on with our lives as if Oyutolgoi didn't exist. With or without it, we are going to be just fine.
|Oyutolgoi mine (Gobi, Mongolia)|
Everything has a limit. Even the greed should have a limit. If Rio insists on waiting until the Mongolian government officials give up, they won't be able to open the underground part of Oyutolgoi mine, never, because we won't tolerate any condition which would be unacceptable for us. Fairness should be the rule of our game.
So, Rio has two choices: Either be respectful and fair and do the business acceptable by both sides, or give up everything and go home. They can sell their share to others, but again, whoever be the successor, our demand stays the same. It might look like that today Mongolia suffers more from Rio's suspension of the underground part of the project, but in the long run the Rio might be the one who hurts more, Mr.Tsagaan said. And he was right when he says, "Let's go ahead and work on some other bigger projects, pretending that Oyutolgoi's underground mining didn't exist". I couldn't agree more. Oyutolgoi is indeed not the only "cow" we have to milk. Now everything depends on whether Rio Tinto wants to change its attitude, or continue being stubborn to ruin the project. We don't have anything to lose if things go wrong and as Mr.Tsagaan says, Rio will lose if both sides go to court. Now speak up, Rio!