Friedland touts Mongolian partnership

Vancouver — Ivanhoe Mines (IVN-T, IVN-N) chairman Robert Friedland says he can see the advantage of partnering with the government of Mongolia as the company works to develop the massive Oyu Tolgoi copper-gold project.

“There are a lot of benefits to bringing a government into a project and a lot of interesting and creative ways in which that can be achieved,” Friedland said during a speech to the recent Mineral Exploration Roundup 07 conference in Vancouver.

Friedland was speaking in Vancouver for the first time since Ivanhoe signed a partnership deal last October that would see Rio Tinto (RTP-N, RIO-L) making an initial investment of $303 million and up to $1.5 billion provided certain conditions are met.

The key condition is that representatives of Rio Tinto and Ivanhoe reach an investment agreement deal with the Mongolian government to develop what is expected to be the world’s largest copper mine with an underground production rate of 200,000 tonnes per day.

Roughly 75% of Rio’s investment is being withheld until an investment agreement is signed.

However, now that negotiations have formally begun, Friedland said he wanted to clarify the impact of changes to the Mongolian mining law, which he said have not been well explained by the media.

Among the beneficial aspects of the new law is a provision that extends the life of any investment agreement to 30 years.

“That’s twice as long as under the old law and is much more appropriate for a project of this scale,” he said.

While the Mongolian government has an option to acquire stakes in strategic deposits, Friedland said this is not such a bad thing, “especially when the government is your regulator,” he said. “This enables them to think as a shareholder as well as a regulator.”

Representatives of Ivanhoe and Rio Tinto are in negotiations with a designated working group of Mongolian government officials assigned by the cabinet to produce a draft investment agreement needed to spur development of Oyu Tolgoi.

Once it is approved by cabinet, any draft agreement covering tax rates, royalties and other legal frameworks would be submitted to parliament for ratification.