Names familiar to many people around the world. Here is the translation of an article by Uyanga G., a member of Mongolian Parliament, who has a different perception and standpoint than maybe many others, regarding the Oyu Tolgoi project. We are talking about the third-biggest copper mine in the world. It might be interesting to hear something different from inside the country, different than the ones circulated through the world media. As a Mongol myself, I felt obligated to bring this voice to the world community by translating this article, using my humble English. The floor is yours...
Begin of the translation
By Uyanga Gantumur
ONE. Simple arithmetic of Oyu Tolgoi
I cannot do calculations using 20 thousand variables. But let's do some math using a simple arithmetic. How much worth is Oyu Tolgoi deposit? It is officially confirmed by domestic and foreign specialists, and by authorized professional institutes that this mine's deposit contains 45 million ton copper and 1800 ton gold. Let's say, we extract 75% of all that. Now, let's estimate the price of this real wealth. As of August 2014, the average price for copper was 7005.15 USD per ton at the London Metal Exchange. With today's rate of Tugrik against USD (1840:1) and considering in average a 29% enriched copper concentration, the total value of copper deposit would be 434.957.715 million Tugrik. Plus, with one ounce being 31.1 gram and the average price of gold in August being 1294 USD per ounce, the value of 1800 ton of gold would be 103.353.569 million Tugrik. The total revenue from copper and gold amounts to 538.311.284 million Tugrik. This is the result of calculating the price of only two known metals-copper and gold- using the average value at the world market, without considering silver and other minerals which are found in the copper concentration.
Mongolian annual budget revenue is 7 trillion Tugrik. We produce and consume only 10 trillion Tugrik worth of goods in a year. 538 trillion equals our budget revenue of 76 years. That is the money we can get just by selling our copper and gold while doing nothing. 76 people have agreed to a deal which would lead to a loss of the fortune all 3 million of us could use for 76 years. I am writing this because the present 76 must not allow this to continue.
The numbers mentioned above are relative. Even though it's obvious that we cannot dig out all of it at once and sell it, this is our stand and basic assessment. This number will go up if copper price rises, and additional resources are discovered through more exploration. In most cases, in addition to the first confirmed deposit, there are more sources discovered during its development, as shown for example in Erdenet case. There are many ways to keep the production profitable without going down from the once achieved stage during the market price fluctuation. And Mongolia has own human resources and professionals who can do it.
Shouldn't we start talking from this standpoint, based on that simple arithmetic calculations? It does not need to be proved that within next decades the rising demand of copper and gold will not go down, and the value thereof as well. That is the main thing we have. Yes, we don't have the best management and the money to mine and process our wealth, but hey, Turquoise Hill, Ivanhoe Mines, and Rio Tinto do not have the necessary funds too, to finance this project. They raised funds with higher interests from the world finance market using our mine as deposit, and also charging us for the payment of the mediator who helped with the fundraising. To be exact, our partner who owns 66% , charges us, 34% owner, for the mediator costs, and that means that Ivanhoe Mines and Rio Tinto are not investors but mediators. What a finance partner we have found! Knowing all this, our government is doing nothing. What a useless government we have! What a nation we are, tolerating such a government and choosing such people to power!
If we have had trusted our national companies and helped them to raise funds from the world banks and finance market, things would have had much better look today. Mongolia is not a country without any experiences. We have been earning profits from one of the world's 10 biggest copper mine which we have developed jointly with a powerful country. People involved in exploring the Erdenet deposit, in its mining, and in dealing with our partner, having participated in all that on every level, are working now in private sector, as well as in state-owned entities, and some of them are also on the dole. They should have been mobilized, and if there is a lack of knowledge or experience, we could have hired necessary professionals from the international labor market. Mongolians have brains and possibilities to do the same as Ivanhoe Mines and Rio Tinto have invited best manager and professionals from the international labor market to work for them on a very attractive conditions, and also to buy the required equipment and techniques.
TWO. Let's sum up what happened at Oyu Tolgoi
In 2007 the investors have made a deal with Mongolian government about the development of Oyu Tolgoi deposit after having talks in three stages, and agreed to both drafts of Investment agreement and Shareholders' agreement. These agreement drafts and a resolution draft of the Parliament were submitted by then-Prime minister M.Enkhbold , together with the Chairman of the Cabinet Office, by handing them over to D.Lundaajantsan-then Speaker of the Parliament. In that first draft were included a concentrator plant with a capacity to process 54 million ton ore, underground and open pit, a power station, waste management facilities, infrastructure with accompanying entities and it was calculated that for all this needed 2.724 million USD. At that time, the price for one ton of copper was 7126 USD on global market. The Investment agreement was signed two years later, in 2009, when copper price was down to 5149 USD , but the amount of investment money was changed to 5.1 million from 2.7 million USD, almost doubled than as it was initially agreed to in 2007. Today, the other party would still not give any explanation as to why they doubled the investment money when the prices for energy and metals on global market were going down. Even I, as MP, couldn't get any response, let alone any ordinary citizen, in regards to this issue until today after I addressed all responsible subjects with this request. This would be the first big question we should demand an answer for.
Next question: Let's discuss about the 5.1 million USD investment as it is written in already signed Agreement, leaving aside the 2.7 million USD with a question mark. Now, let's have a look at the investments introduced in the Technical and Economic Feasibility Study (TEFS) which was discussed at the Minerals Council of Mongolia:
1. Open pit mine 278 Mill. USD
2. Underground mine 1512 Mill.USD
3. Infrastructure 646 Mill.USD
4. Concentrator plant 832 Mill.USD
5. Power plant 460 Mill.USD
6. Indirect costs 228 Mill.USD
7. Owners' expenses 176 Mill.USD
8. Waste management 261 Mill.USD
9. Currency fluctuation and unexpected costs 438 Mill.USD
10. Possible increase of costs 293 Mill.USD
11. Environmental and closing costs 2 Mill.USD
The costs including owners' expenses, currency fluctuation and unexpected costs, and possible increase of costs make 17.5% (907 Mill.USD) of all costs. The costs for power plant could be saved since there is a power plant project has started at Tavan Tolgoi mine and Oyu Tolgoi is considered as the main buyer. There are talks going on with Oyu Tolgoi as consumer and not as investor.
One can see that in that investment is included everything from taking in account the currency fluctuation considering the possible risks, to developing of open pit and underground mining, building infrastructure, concentrator plant, power plant, and the closing costs. Certainly all these calculations are not made by just one person by heart.
Our partner and investor, superior than us in dealing with this matter, has paid the professional companies like Canadian AMMEK and Australian MINPROK to prepare a initial economic evaluation of Southern Oyu open pit and an extended version of evaluation including both northern and southern zones of Hugo Dummett deposit in 2006, in order to list the mineral reserves in the unified registrar of mineral resources. Also the final version of Technical and Economical Feasibility Study (TEFS) for both open pit and underground mining of Oyu Tolgoi deposit was prepared by the above mentioned companies in 2007-2008, based on confirmed estimation of copper-gold deposits. This final version of TEFS, prepared for three years by those experienced companies, chosen by the investor itself, was introduced to the Mineral Council of Mongolia in January 2010 and a ruling was issued. But why is it now an additional 4.9 billion USD required to start the underground mining? What expenses have gone up so high? We have the right to ask and get a clear answer for that question because we pay 34% of it, and we must ask firmly because today's as well as our future generation will be paying this debt. I demand an answer to this my second question.
THREE. In order to reach a mutual understanding, we must eliminate the differences of numbers. Without this, even a joint business in a small trade would fail. Even though it says in the Investment Agreement that approximately 1 billion USD was spent for the Oyu Tolgoi exploration, Ivenhoe Mines Mongolia Inc. has reported in its exploration statement that 171.7 billion MNT in total was spent for the exploration, including 74.8679 billion MNT for drilling, 8.9295 billion MNT for lab and tests, 3 billion MNT for core processing. The sum of these three expenses makes only 86.8 billion MNT, and the rest of 84.9 billion MNT from the total was left unexplained. All that needs to be reported, properly documented.
The results of the working group established by the joint order of Deputy Minister, Finance Minister and Mining Minister, and worked more than a year to investigate the excessive 2 billion USD investment of Oyu Tolgoi project, are still not available to the public. Even the members of the Parliament have not received it yet. That must be disclosed. In regards to the tax-related debt of 130 million USD, it might be a small amount compared to the numbers mentioned above, but Rio Tinto should be sincere and pay this money. Isn't that shameful for such a big company to dispute a tax debt of 130 million USD and intends to take it to international arbitration when Mongolians are granting a favorable condition to develop a treasure which can feed us for 100 years and plus borrowing money with interests?
In the Investment Agreement, signed and approved, the initial investment was set as 4 billion USD, but in TEFS received by the Mineral Council of Mongolia that number was given as 5.1 billion USD. Which one is the number we should stick to? One should deal with the next question after we receive clear answers to those plain questions. So, is it that the project was delayed by the Mongolian Government or is the other side at fault? It is all right if the Prime Minister meant it precisely by word when he said that "We are ready to resolve the investment issue." But if he meant that we agree on additional investment if necessary, then he should face a huge political responsibility.
Can't they understand Mongolia?
480 billion MNT had to be deducted from the budget income of last year due to the investment delay of Oyu Tolgoi project. We tightened our belt accordingly, and were not able to increase the food amount for our children at the kindergarten and daycare , let alone to raise the salary for their teachers. New kindergartens couldn't be built and children were to stay home forcing their mom and dad stay without jobs.
The parliamentary caucus of the "Justice" coalition had asked Da.Ganbold , a Mongolian representative in Oyu Tolgoi's board, particularly about this issue in the presence of Mongolian Prime Minister, Mining Minister, Minister of Economic Development and other officials.
When I heard a Mongolian saying that the cost over-runs also include the costs for Oyu Tolgoi"s foreign directors and officials who travel around the world with their wives and children, flying business class and staying in luxury hotels with a rate of 5000 USD per day, and when he tried to justify it by saying that we should understand the culture of high-level-people who represent big investors and deal with big monies, although it is not acceptable to us, I became very agitated.
Mongolians pay the 34 percent of all this by a loan with a high interest. All right, we understand them and we pay the 34 percent of it. Why they could not understand us?
Why they cannot understand that in fact Mongolian children have no kindergarten to go, and that classrooms for 25 students are overcrowded with 45 students, and that a teacher with a meager salary of 400 thousand MNT works with 40-50 students all day, and that we all get poisoned by toxic air, and that people are suffering and dying due to the insufficient number of hospitals and services, and that the newborns sleep with their mother on the floor at the maternity clinics? Is there no one who would explain all this and make them understand? Why not put someone else in this company to represent Mongolians and to explain and defend our interests? To defend Mongolia's interest in Oyu Tolgoi, we need someone who knows Mongolia, understands Mongolians, and who can sense own national interests of this country and people, but not somebody who just speaks English and has a foreign education.
Who is the lead goose, or the investor?
There is no one today or will be in the future who would say, let's put the Oyu Tolgoi in reservation and send the investors home.
Instead of calling those who speak out about defending own interests as populists or nationalists, and blaming them for chasing away investors and ruining the economy, and playing the smart ones, one should demonstrate own facts and numbers beneficial to Mongolia, against the ones mentioned above. An investor is not a butterfly you would not want to scare away from a flower. Using this opportunity, I want to say some words about the investor.
Mongolian law on investment states that an investment means the tangible and intangible assets attributed to the joint capital and reflected in financial statements of the business entities which are for profit oriented activities in the territory of Mongolia, and an investor means a foreign and domestic investor who make an investment in Mongolia, and that a foreign investor means a foreign legal entity or individual (a foreign citizen or stateless person who is non-resident in Mongolia as well as a Mongolian citizen residing permanently in a foreign country) that makes investment in Mongolia.
Let's see what happens in real life, comparing it to the words and sentences written in this law. Last spring Mongolians collapsed when the greenback strengthened sharply. The government has trembled, too. Why? Because the investment was reduced and the investors were chased away by those evil nationalists, said every smart mouth. The consequences of stalling of Oyu Tolgoi investment were cruel and Mongolians whose lives depend on dollar were almost ruined due to skyrocketed rate of Mr.Dollar who was scared off by those populists.
But imagine that the money called as Oyu Tolgoi investment on which depends our lives as some want to claim, does not go through Mongolian banks and financial organisations; instead it goes out directly being not a subject matter of our concern. In another words, it has not a smallest effect at all on stabilizing Tugrik and keeping the dollar rate steady. They even don't storage the concentration ore on Mongolia's territory but keep it at storehouses outside the border. Buying toilet papers from Mongolian stores, feeding Mongolians with rice meals bought from S.Bayartsogt's eatery, paying salaries to some Mongolians, and paying taxes, obligatory anywhere in the world, shouldn't be called as investment. Contempt might be a word too soft for that.
If describing the mandatory tax payments as our profit is not an offense, what is it? A trader does not count all his income as profit after selling all his goods. Anyone in Mongolia knows that the profit is what is left after paying taxes, rent fees, salesman salary, and subtracting the price for goods, costs for food and travel, etc.
An another example: Mongolia's Petroleum Law was passed this spring after much struggle. One of the great improvement of that law , introduced by the working group led by MP Kh.Bolorchuluun, is the part stating that the money flow of the foreign companies operating in this field should go through Mongolia's banks and financial entities. With effort from MANAN this law was defeated by 50:50 and another working group was formed with MP Ts.Nyamdorj in charge. But he reintroduced the law without that most important part and with approval of the majority the law was passed. MANAN still exists. We were reckless by believing that MANAN would disappear if MAN and AN would go separate, and reappear if they join together to govern. This MANAN was a very thick one and wouldn't disappear so easily. Every morning when we get up we should remind ourselves that MANAN which was built up in the past 24 years by mutual benefits and shared pockets, and trapped and hooked up themselves with their failures and sins, is still there , thicker than we thought.
It's the MANAN what makes MAN do the opposite while saying , "Dollar gets out of control. The Government should resign!" That is exactly what is called populism. And such people and party should be called populists.
We now know that the definition of investor as written in the law does not match with the real life and that we should clearly define and understand who is the investor- the butterfly we scared away thus allegedly triggered the dollar go crazy. Let's stop being fond of every golden-haired with money in the pocket and calling them as investor-butterfly. If the investment is the most important factor affecting Tugrik's rate, the investment should be redefined by reflecting that influence. As a lawmaker, I will be introducing an amendment to the investment law to make such changes. So, let's ask ourselves again: Is the operator company of Oyu Tolgoi project an Investor?
One. Mongolians borrowed 1.7 billion dollars with 6.5% interest in order to jointly develop the Oyu Tolgoi mine (Interest-on-interest is paid too)
Two. The loan interest fee of this company has reached 500 million dollars since 2009 and we started paying 34% of that fee.
Three. The enormous amount of money of Oyu Tolgoi and the payment from selling of concentration ore do not go through Mongolia's banks and therefore it has no influence in stabilizing the currency rate.
Four. We have practically become dependent on this company, hailed as the biggest investor, because any interruption of production would trouble Mongolia's budget.
That is how the lead goose looks like. The second one would demand more since the first one set such an example. Are we going to survive if such geese come in flock? May such goose not come to us in flocks.
ONE. We should get clear answers to the questions mentioned above. I am going to demand it in the name of the Mongolian people along with my friends. After that, the next issues will be able to get fixed. In order to run this project risk free, beneficial to all and properly, a right order needs to be set, and the very first thing is to have clear, honest and complete answers to those questions.
TWO. Oyu Tolgoi project is the first aim of the flock of geese. The next geese should have a proper information about the development of this project and any issues or disputes related to it. We don't have such amount of money to counter the propaganda against Mongolia"s government and Mongolians, lavishly paid by Rio Tinto. Therefore let's open a website which contains all the information about the development of this project, and let's introduce it to the world. This will bring all the information to both natives and foreign people openly in proper manner. One cries out always that the investors were scared off because of the false information. But anyone knows that an investor would not run away from a treasure which is ready to be possessed. There is not too much money needed to prove to the world that Mongolia's government and Mongolians are not evil people scaring off the investors, and that all they demand is only a fairness. When Mongolia's government introduces officially that website, it is enough to distribute the news to all world media organs using the only state-owned media agency Montsame which cooperates with major news agencies of the world.
THREE. Before all this, it is important that we Mongolians should unify our standpoint regarding Oyu Tolgoi, and if we could come together it can be improved. But I personally feel that it might be very difficult. Those who signed the agreement with an investment increased by billions of dollars by yielding the other side are not many, but they just represent the front. This was carried out by a whole gang. If this agreement gets nullified, everybody involved will be exposed. Maybe they are being held captive by that circumstance. Calling us populists, or as people scaring off the investors, or as ignorant street people who cannot do calculations with 20 thousand variables is just the cover-up, not the answer. To tighten its grip and increase the profits, they keep pushing Mongolians along with their government to raise the investment fund. If we can make those who signed the agreement responsible, politically, then we could free ourselves from that grip. As the saying goes, committing murder as a result of being embarrassed, we can't let us falling into more debt just to cover the bribes of some people, can we? Should we , being modest, allow us more debt we could not possibly pay off in our lifetime, or stop it while our loss being minimal, unless Rio Tinto becomes more reasonable and fair, since Mongolians won't die of hunger after all without selling Oyu Tolgoi, right?
Better scare it off than being exploited
The message we deliver to the world must be clear and fair. This is not difficult, nor it requires lot of money. Would it be reasonable for others to run away following Rio Tinto, in case Rio Tinto leaves, instead of competing to take its place? Rio Tinto is scaring off other investors in order to dominate in Mongolia. It is their wish to scare off others by making Mongolia look bad. The development of the project has been delayed because Rio Tinto does not play fair. There is a big opportunity to make money in Mongolia's Oyu Tolgoi if one plays only a fair game.
In the end the guilty parties are the government which brought us in such a situation and those who signed the agreement. We should look at ourselves first and those whom we elected before start swearing at Rio Tinto. The investors are not the kind-hearted Jesus, Buddha or mother Theresa who want us to become developed and be rich, nor the beautiful butterflies one wouldn't dare to scare off from flowers. They are just people who want to invest their money in rewarding projects for profits. They are smart. They know how to approach and talk to people who know their rights, how to defend their interests and have strong self-esteem. They know also how to talk to people who dishonor own country, don't understand own interest and how to defend it, and those who can be trapped by money, as well as how to tighten their grip and, what to take and how.
People who mistakenly regard their spoken English as education, view the money as their measurement of everything and set it as their target, whose brains , far distant from the root and not immune anymore, are washed by neo-liberal propaganda, cannot be the power to stand against it. Instead they form the fifth colony, serving the other side by claiming they were loyal to their beliefs.
Lastly, I want to say few words to our dear INVESTOR. You have started the work based on the TEFS, prepared by the company of your choice and accepted by the people you bribed. Now, do your job with the money approved because we can't allow us more loss. Complete all the work listed in the project according to the agreement approved officially on October 6. 2009. If you want to talk about raising the funds for underground mining, a new situation will emerge where the Investment agreement and the Shareholders' agreement need to be discussed anew. Same as in, if somebody wants to sell his house for 100 million and made an agreement with the buyer, but the deal will have to made anew if the next day seller wanted 300 million instead, or there is going to be no deal at all.
As the world leading company and as intelligent people, you must give an answer to my questions above. Fairness is a very important, not measurable, nor comparable thing in a cooperation. Buying a Mongolian does not mean you can do it with all Mongolian. Mongolians are people who can be fair if treated fairly. I have the hope that only after all disputed questions are cleared, our cooperation will succeed and we can work together for our mutual benefit. But if you decide to keep on exploitation, repelling shall be the right choice for us.
This is my standpoint on Oyu Tolgoi project.
Uyanga Gantumur, Member of Parliament of Mongolia
End of the translation
1. Mungh - smallest monetary unit equals 1/100 of the basic monetary unit (tugrik)
2. 20 thousand variables- referring to what MP Bayartsogt said at the TV debate about Oyu Tolgoi agreement by defending the agreement that it includes precise calculations made using methods with 20 thousand variables.
3. Tugrik - Mongolian currency , abbr. MNT
4. 76 people - the total number of members of the Mongolian Parliament
5. Erdenet - a copper mine jointly developed with Russia (still producing concentration)
6. Tavan Tolgoi - a major coal mine close to Oyu Tolgoi
7. S.Bayartsogt - an MP from Democratic Party
8. MANAN - nickname for the coalition of the two main parties, MAN (abbr. in Mongolian for Mongolian People's Party) and AN (for Democratic Party), making a term meaning "Fog" in Mongolian)
I urge our readers to read the following assessment issued by the Oyu Tolgoi Watch almost 4 years ago: http://www.miningwatch.ca/sites/www.miningwatch.ca/files/OT_issues.pdf . Things looked problematic back then, and as MP Uyanga mentioned in her recent press conference, the issue about the differences of salaries between domestic (Mongolian) and foreign workers still exists today and she gave just one example to prove it:
A Mongol welder gets 71.6 thousand MNT a month while a foreign worker in the same position get paid 1.8 million MNT monthly for the same job. (With the current exchange rate between MNT and USD-1888:1, that would be $38 VS $953). That is 25 times (!) more than what Mongolian worker receives. Is that some kind of exploitation? As they are praised as the top leading company with a worldwide reputation, it is hard to believe that Rio Tinto is taking advantage of native workers by abusing them with such underpayments! Are they trying to make a profit from it? They should be ashamed of that, and I doubt very much that with such an attitude and unfairness towards Mongolians, they will be not welcomed, nor respected, maybe even hated by the natives. If both sides hate each other, no business shall be made between them. Business should be based on trust, fairness and mutual respect.