Mongolia eyes diplomatic partners, mining deal soon

  • World
  • Tuesday, 04 Mar 2008

MYT 2:01:23 PM

TOKYO (Reuters) - Mongolia will take advantage of its rich natural resources to forge closer ties with new allies and aims to clinch an investment pact with Canadian and Australian firms in a couple of months, its foreign minister said on Tuesday.

While balancing relations with its two powerful neighbours, China and Russia, Ulan Bator will seek to boost ties with resource-hungry Japan as well as South Korea, the United States, Canada, and Australia and lure investment from those countries, Mongolian Foreign Minister Sanjaasuren Oyun told Reuters.

"For us, balancing trade and economic relations with two main neighbours is important, but also we ought to attract investment from what we call 'third neighbour' countries," Oyun said in an interview.

"We don't have one country in mind, but we would like to have as good relations as possible with these countries, as if they were our neighbours."

As part of a drive to implement this carefully crafted policy, Mongolia was expected to finalise a major investment deal "sometime in the spring" with Canadian exploration firm Ivanhoe Mines Ltd and Australian miner Rio Tinto for the giant gold-copper Oyu Tolgoi project in the Gobi Desert, Oyun said.

"We are hoping to come up with a decision or solution that is beneficial to both sides," she said.

Rio Tinto and Ivanhoe plan to spend up to $3 billion to develop the Oyu Tolgoi copper deposit, which they say could lift Mongolia's gross domestic product by 34 percent.

The draft pact, signed last April, had been under review by a parliamentary working group, but the Mongolian government withdrew it in late December and said it would form a group of cabinet ministers and legislators to try to move the project forward.

Oyun said it was not clear whether the Mongolian government would want to amend the draft agreement under which Mongolia would take a 34 percent stake.

Asked whether Mongolia could scrap the draft agreement, she said: "I don't think so because it is such an important project for Mongolia."

"The decisions that will be made in the mining sector are extremely important for our foreign policy as well."

The delays in approving the deal have escalated the project costs for Rio Tinto and Ivanhoe.

"It has not been an easy thing because it is the first time that Mongolia is actually negotiating such a big-scale, world-class project," said Oyun, a geologist by training, who follows the sector closely.

"I think it's time to come up with a good solution because so many jobs and incomes are behind this big project once it starts going."

The grassland nation of only 2.6 million plays host to miners from all over the world, but has yet to develop its largest resources.

Soaring prices for copper and gold prompted Mongolia to hastily introduce a windfall tax in 2006 and change its minerals law to guarantee a hefty share for the state.

Mongolia's laws had previously been among the most attractive in the world for foreign miners.

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