Our journalist talks to MP
N.Batbayar about the ongoing controversy over the Oyutolgoi agreement and the
percentage of Mongolian shareholding in the project.  

What
are your demands?           

The provisions of the shareholders’ agreements are not in Mongolia‘s interests and
we want them changed. I have been saying this from the beginning and I still think
state organizations and officials should press for this change. It seems not
many understand the flaws in the agreement and/or are unwilling to change them.
Mistakes were made and have to be set right. I also feel the mistakes were
deliberate and not accidental and those who wanted to harm Mongolia’s interests
should be identified and charged.        

How
is Mongolia affected by sale of rights shares in Ivanhoe Mines?   

Raising USD4billion through issue of rights reduces the percentage of Mongolian
shareholding in Oyutolgoi LLC.  Mongolia owns
34% of shares before more funds are raised and the company’s capital is USD1
billion. But if Ivanhoe’s capital amount reaches USD4 billion through sale of
rights shares, the percentage of ordinary shares drops from 100% to 20%,
meaning Mongolia’s 34% actually becomes 6.8%, with Ivanhoe Mines owning the
remaining 93.2%.         

The price of Ivanhoe Mines shares has risen a lot at the New York Stock
Exchange because of its control of Oyutolgoi. This was Mongolian property
before the investment agreement handed it over to Ivanhoe Mines. The agreement
authorizes Ivanhoe Mines to raise funds on behalf of the Government but instead
of directly investing the money in developing the project, Ivanhoe Mines gives
it as loan and charges interest. Why should we allow Ivanhoe Mines to raise
funds for Mongolia’s mineral resources and then charge 10% annual interest?

Why
is the interest rate so high?          
The
rate is 9.9% and must cover consume price rise in the USA. Interest rates have
been falling all over the world and the US consume price index is no concern of
Mongolia. This should not be allowed at all. We would have had no reason to
protest if the agreement was mutually beneficial but it benefits only one side,
as seen in this present loss to Mongolia of USD 4 billion.

What
happened to the talk that Mongolia would own 34% of not only Oyutolgoi LLC but
also  of total shares of  Ivanhoe Mines Ltd?     

If Mongolia actually owns 34% of the shares of Oyutolgoi LLC, it  would also own 34% of the funds raised in the
capital market. But Mongolia has agreed that it will not buy shares in Ivanhoe
Mines. If we had shares convertibility between the parent and the daughter
companies, Mongolia would not have lost USD4 billion at present.

How
can this be corrected?       
We should cancel the agreement, as we have the
right to do. The Government should prepare a new agreement and get it approved
by Parliament. Let us wait for the Oyutolgoi LLC Representing Managing Council
meeting to conclude.