It’s one of those dramas that has carried on so long that its resolution is oddly underwhelming.
But in early October, after years of negotiations, setbacks and frustrations for shareholders, Vancouver-based Ivanhoe Mines (IVN-T, IVN-N) signed a comprehensive, long-term investment agreement with the Mongolian government that allows the company’s massive Oyu Tolgoi copper-gold project to go forward.
Rio Tinto (RTP-N, RIO-L), Ivanhoe’s strategic partner at Oyu Tolgoi, was also on hand at a signing ceremony in Ulaanbaatar attended by the president, prime minister, cabinet members and other top government officials.
The delay has been frustrating and expensive, but this is a great step forward for Ivanhoe, Rio Tinto and Mongolia, as together they can now build a huge, profitable, long-life mine that will give a significant boost to the Mongolian economy.
And the three partners truly need each other here: Trailblazer Ivanhoe has provided the development drive; Rio Tinto has the expertise for the tricky job of underground bulk mining; and the Mongolian government contributes its personnel management and infrastructure-construction abilities.
Geopolitically, it’s also a nice way for Mongolia to moderate Chinese and Russian influence in the country.
The new development agreement wisely kicks the question of building a smelter down the road a few more years until the scope of the Oyu Tolgoi project is better grasped in terms of geology, possible production levels and district potential.
It’s a watershed moment for the ragged group of Western juniors who are still hanging on to mineral prospects in Mongolia, too. They finally have some good news to pass on long-suffering shareholders and can head to the upcoming annual mining conference in Ulaanbaatar with renewed enthusiasm for what is without question a mineral-rich country.
On a side note, it’s interesting to see Ivanhoe chairman and consummate showman Robert Friedland keep a very low public profile during the final stages of negotiations and the actual signing ceremony.
There’s nothing quite like having your effigy burned by a mob in a city centre — as Friedland’s was in Ulaanbaatar in mid-2006 — to tell you simultaneously that you’ve hit the big time and probably need to ratchet down the promotion and keep your name out of the headlines.
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