Ts.Davaasuren: It is time to change our attitude and assess the situation correctly
Interview with Ts. Davaasuren, Member of Parliament and Head of Oyu Tolgoi Sub-Working Group.
-The two sides have started negotiations on ensuring the interests of Mongolia in the Oyu Tolgoi agreement. Did you achieve your main goal?
-The Government Working Group chaired by Kh.Nyambaatar, the Minister of Justice and Home Affairs, which is responsible for ensuring Mongolia’s interests in the Oyu Tolgoi deposit, has met for the first time with Oyu Tolgoi investors led by B.Bold, Director of Rio Tinto’s Copper Group.
At this meeting, the two sides expressed their views. So it is too early to talk about achieving the main goal.
-Before the talks, both the government and members of parliament expressed the view that the Dubai Agreement should be terminated. Has this issue been discussed during the negotiations?
-In connection with the agreement with the investor, one of the main provisions of the 20-point guideline submitted to the Government by the Temporary Committee of the State Great Hural, which is responsible for ensuring Mongolia’s interests in the Oyu Tolgoi deposit, is to terminate the Dubai Agreement in its entirety. $ 4.3 billion in loans and $ 1.8 billion in debt cancellations.
If this $ 4.3 billion loan is not canceled, by 2051, our country will not be able to repay its dividend loan and will end up with a debt of $ 22.4 billion. You may remember the information made by B.Solongoo, Deputy Head of the Cabinet Secretariat. Therefore, one of the main issues of this agreement is the “Dubai Agreement” and the $ 4.3 billion loan received under it, and other harmful provisions.
-Didn’t you take the $ 4.3 billion loan you received under the Dubai Agreement and use it at the Oyu Tolgoi underground mine?
-That’s brainwashing. Rio Tinto used the loan to recoup its initial investment and use it in its own business, such as expanding its iron ore business or using a collapsed mine. In fact, Oyu Tolgoi did not need to take that loan. Turquoise’s small shareholders are now winning the case. In particular, Oyu Tolgoi was able to invest in underground mining with its operating income.
-B.Bold, Director of Rio Tinto’s Copper Group, said, “This agreement will be aimed at making the Oyu Tolgoi agreement mutually beneficial.” B.Solongo, the head of the Cabinet of Ministers, said the same. Did stakeholders participate from this position?
“Then that’s good.” If both sides can approach it, it will work. Negotiations are just beginning, let’s see. In general, it is time to change attitudes and assess the situation correctly. The number of their representatives in the current Parliament has drastically decreased.
-Then why is it that the Dubai-2 agreement will continue to raise money and make loans on the international market, and Rio Tinto will pay $ 2.3 billion? There are rumors that they are going to take a USD loan from Oyu Tolgoi, is this true?
-True. Rio Tinto and Turquoise Hill Resources agreed on May 9 to borrow an additional $ 2.3 billion for underground mining, according to the company’s official websites. The agreement included support from the government. There is also a provision for spending on this support. In other words, it is an expense that is trying to lobby our people or, to put it bluntly, corruption. Therefore, in its minutes of its meeting on the 20th of this month, our Ad Hoc Committee instructed the Government not to allow any additional funding or loans. The loan is expected to repay $ 10 billion.
If you take such a loan again, your remaining debt of 22.4 billion USD will increase. So there should be no question of additional loans. In general, the investor, Rio Tinto, must invest in accordance with its contractual obligations, make a profit and make the next investment with its operating income.
In short, we have an agreement to release our resources and invest half of them. Today, the price of gold, copper and non-ferrous metals in the world market is rising at an unprecedented rate, which increases the company’s ability to invest without borrowing. As prices rise and sales increase, Mongolians re-lend and borrow when they have the opportunity to benefit from Oyu Tolgoi’s resources.
-There is an expectation that the Investment Agreement and the Shareholders’ Agreement will change the provisions that harm Mongolia’s interests and improve the agreement. When will it be finally resolved?
-The Temporary Committee of the Parliament instructed the Government to negotiate with investors and to “amend and repeal the provisions of the Investment Agreement that harm Mongolia’s interests, for example, to increase the reserve fee to the world standard and to finance it by non-loan investment These include issues such as verifying compliance, shifting management fees from cost-effective to performance-based, stopping profits from high loan payments, transferring revenue to a Mongolian bank account, and reviewing cost overruns and complying with the Feasibility Study.
Of course, this will not be an easy deal. It is clear that the investors will not compromise easily because some of our politicians have been illegally lobbied and made too lucrative contracts. On the other hand, the agreement with our government. In the International Court of Justice, it does not matter whether the government belongs to S.Bayar or someone else, it is the Government of Mongolia. Therefore, one of the key factors in changing this agreement is to identify the issue of corruption among our politicians and prove that an ineffective agreement was made based on it. Such issues have been identified from the beginning.
For example, before the signing of the investment agreement by the former Minister of Finance, S.Bayartsogt, the company bought the shares, signed a profitable agreement and signed it, and then sold the shares and made a profit.
His well-known companies have also made huge profits by supplying goods and services to Oyu Tolgoi. There is also talk of B.Bold, the director of Rio Tinto’s Copper Group, transferring large sums of money to our B.Byambasaikhan and six prominent politicians between 2010 and 2018. Such issues need to be examined.
-Some researchers and economists have questioned whether Mongolia will be able to recover the more than 10 billion lost to Rio Tinto through negotiations. What is the problem? The issue of funding for underground mining has been reduced from 4.4 billion to 15 billion due to drilling and mining difficulties ….?
-According to the first feasibility study, an investment of 5.1 million USD is required, but why is it increased to 17.8 billion USD by 2020? As of 2020, Oyu Tolgoi has a $ 9.4 billion shareholder loan, a $ 4.3 billion loan from a third party (Dubai), a $ 2.7 billion share financing from Rio Tinto, and a $ 1.4 billion stake in our 34 percent stake. funding has been made.
According to the estimates of some of our economists, when Oyu Tolgoi sold at world market prices, it was possible to finance the development of the underground mine with its operating income.
For example, Oyu Tolgoi has been operating since 2013-2015 with a net profit of $ 1.80 billion, which it used to repay its shareholder loans. In other words, it would have at least $ 400-500 million a year in free cash. In this case, it can be concluded that it was possible to fully finance the development of the underground mine with its own operating income.
This needs to be confirmed by an independent financial audit that is recognized. We are talking about resolving this issue without delay. In fact, this investor said that he would invest his money in accordance with his contractual obligations, make a profit and make his next investment with his operating income, but he did not want to take a loan and put our country in debt. Today, Oyu Tolgoi accounts for 36 percent of our total external debt and 53 percent of the private sector’s external debt, increasing the country’s debt burden and lowering its credit rating.
-Will the negotiations be in stages or when will the next meeting take place?
-The next meeting was scheduled for the 19th of this month, but the investor requested to postpone it indefinitely due to the situation in Kovid. The positive step that can be taken at this meeting is to reach an agreement, first of all, to cancel the Dubai Agreement in its entirety, including its $ 4.3 billion loan and related damaging provisions, and to start negotiations to improve the mutual benefit of the Investment Agreement. that is.