It is now recognized that the controversial Oyu Tolgoi Investment Agreement is not beneficial for Mongolia because investors have increased capital expenditure violating the terms of the Investment Agreement.

The Oyu Tolgoi Investment Agreement that was signed in 2009 says that 6.2 billion US dollars was to be invested in the mine until the first resultant productions of the project.

But the total cost of the Oyu Tolgoi project has leap to 24.4 billion US dollars from the estimated 13.2 billion US dollars, including developing an underground mine and sustaining capital costs by Turquoise Hill last year. The total cost estimate in 2010 was 9.55 billion US dollars. Mongolia will have dividends only after it pays 34 percent capital expenditure cost for the costs incurred.

The increasing capital expenditure delays the time in which Mongolia will be able to claim dividends for the project.

The Minister for Mining, D.Gankhuyag, said the Government has questioned why the investor increased the capital expenditure but there has been no reply so far.

Shareholders are expected to receive dividends of the project by 2019. According to the feasibility study of the project the total cost of the project, including development of an underground mine was 14.6 billion US dollars but now the total cost has inflated to 24.4 billion US dollars.

Mongolia owns 34 percent of the Oyu Tolgoi project and Rio Tinto owns 66 percent in accordance with the 2009 agreement. Mongolia has borrowed money for its share, with the loans to be repaid in part with profits from the mine. The agreement also allows Mongolia to increase its stake to 50 percent – but not until 30 years after the agreement took effect.

But investors have increased the project cost and caused a delay of dividend violating the terms of the agreement is a real shock for Mongolia.

The Oyu Tolgoi Investment Agreement was based on a feasibility study. According to Mongolian Minerals Law any changes to expenditure should be passed by the Minerals Professional Council including the Oyu Tolgoi Investment Agreement.

But it appears that investors have violated the Agreement and Mongolian Law.

The shareholders meeting is scheduled to take place on today.