I copied the following from www.mongolia-web.com
Written by Ulaanbaatar correspondent
Saturday, 13 May 2006
Mongolia Web News, Ulaanbaatar. Mongolia's State Great Khural (Parliament) has passed a controversial law on windfall profitts this Friday. The law would enable to government to take up to 70% percent of profits on mineral resources like gold and copper, if these raw materials would rise above a certain price level. It is likely that this law was inspired by recent popular protests on the influence of foreign mining companies like Ivanhoe Mines (TSX: IVN)(NYSE: IVN)(NASDAQ: IVN) and the possible drain of mineral resources from Mongolia, without much benefit for the country itself. However the new law could have alarming consequences for the development of the mining sector. If the prospects on profit for large cooperations are weakened by this law, it might mean less interest and a possible withdrawal of large reliable investors from the sector, and leave if it up for grabs for smaller, less reliable parties.It seemed the government was very eager to give a signal to the people, indicating that Mongolia is not willing to give up its national resources to foreign investors. The new law was rushed through parliament within a week, with support of both the MPRP and the Democratic Party. But just the sheer haste and apparent lack of in-depth research on this crucial topic, leaves a question of whether this is indeed a step in the right direction.
Comments
Popular Pressure Written by Guest on 2006-05-14 04:23:16
We should not forget to take into account the circumstances how the government came to this law. It was certainly effected by all the protests that have been going on in the last period. The gov maybe wants to give a signal to the people they take their protests seriously, whether this is the good or the bad way is another question. In this respect I would find it highly unlikely the president can veto for this. Maybe he would prefer to do so, as he is genrally in support of foreign investment, but with the current explosive public opinion on this he might only create a counter effect.
More discussion of IVN shareholdersWritten by admin on 2006-05-14 04:29:48
Link: *Ivanhoe shareholders forum *Mongolia Neweurasia
who knows Written by Guest on 2006-05-14 04:02:45
Who knows if it is good decision or bad. I think time will show. Foreign investors should respect the country and their decisions. What I see is that both sides want to get best out of the deal which is good. Especially, Ivanhoe which has bad reputation that people says. It is not people's faulse, you can't do anything about it. Also I have fear too. Who knows.
Written by Guest on 2006-05-14 03:42:09
What are the stipulations of this new legislation? e.g. Does it effect all current mining operations or only potential future ones.
Aggressive or not Written by Guest on 2006-05-14 04:28:33
Whether or not a company, or Ivanhoe for that matter, is aggresive, depends of course totally on the perspective. Maybe in the international mining world their behaviour is common practise, but of course you have to take in account that the sheer size of Ivanhoe's operation can be percieved as intimidating in Mongolia. Ironically, it might be the fact that Ivanhoe choose not to fly under the radar - as most companies do, has exposed them in such a way that they recieve all the blame. All the projects and efforts of creating a good name and trying to give something back to the community have made them known by the public and maybe indirectly contributed to the current sentiments.
Bad Law Written by Guest on 2006-05-14 03:18:06
This is an example of a bad law - and a boneheaded move by the government. This is a great way to drive western investors from your country. Keep this up and you'll be left with the Great Dragon swallowing your resources - and will they care about the standards western investors use? Tom Terry www.thomasterry.com
Written by Guest on 2006-05-14 02:58:12
PS How has Ivanhoe Mines been "aggerssive" (referring to the first comment.) It would seem they have been very patient (spending millions of dollars over many years based on the word and law in Mongolia) and the only aggression I see are social benefits and hiring of Mongolians in the Ivanhoe Mines...those are of benefit to Mongolians, not harmful. I wish the Mongolians had facts, and did not make opinions based on false information. Too bad, very sad if this goes forward...and then people will realize only when it is too late.
Written by Guest on 2006-05-14 02:55:19
This could be the most harmful action the Mongolian government could choose to take. This is a hasty decision; which I hope the Mongolian President has the vision to veto. This bill could do irreparable harm to the country's prospects. ANY mining company is taking on huge risk by spending millions of dollars on the CHANCE of finding minerals and without knowing the future price of such minerals. The Parliament has passed an unfair law; they have not been honest, nor fair - what if the minerals found are inadequate? Will they give a "Windfall refund" of taxes? No, we don't see that; it would seem to show greed and unfairness. What if future minerals prices are low? The mining companies are risking their monies on such chances, and the Mongolian bill should the President not veto it, is taking away any upside, there will simply be no motive or incentive for ANY mining company to spend their resources in Mongolia - especially should Mongolian's not be people of their word and reneg. They should consult economic advisors who will tell them, this is NOT the way to encourage economic development in their country. Is not Mongolia a democracy in every sense of the word?
Re: win or lose Written by Guest on 2006-05-14 01:44:01
What "aggressive behavior" by foreigners are you talking about? Are you referring to their actual work of exploring, prospecting, adding their effort, time and money to development of mines in the "host country"? Also, what socio-cultural aspects are you referring to? The fact that Mongolia was essentially a Soviet satellite state with a Communist/Socialist government for the past fifty years that may have inculcated socialist and anti-capitalist norms in the populace? This called hypocrisy. If you want your "socio-cultural" socialist values to be respected, then don't encourage foreign companies to invest their time and money in your country. But too late, the "host country" already did. It would be nice if hospitality toward their guests were one of the socio-cultural aspects as well, particularly when the guests have potentially provided the means for the Mongolian people to become wealthy. In the interest of dialogue, let me make the point of the view of the foreigners very clear for those viewing: The foreign mining companies have come to Mongolia to do what they have done in other parts of the world, namely develop mines. They have nothing against the Mongolian people or government per se, and are willing to give the host country its due by paying taxes, adhering to environmental regulations and employing Mongolian people in their efforts. At the same time, the foreign companies feel that if they purchase an exploration license from the host country government in good faith, if THEY discover good mining prospects that the host country was not aware of, if THEY spend their effort, time and money in finding out how much metal is in the ground, go through the trouble of getting the workers, equipment, mining shafts, buildings, and factories organized in order to retrieve the metal from the ground, that the mine is their property in the same way that a ger or a horse is the property of a Mongolian citizen. Profits from the mine should then be taxed as profits from other property is taxed. If a Mongolian buys cows, and the cows produce milk, the Mongolian citizen should be able to sell the milk for whatever price he or she is able to get. If milk is in high demand, the government should not take the view that the citizen has made a "windfall" profit. Perhaps the citizen bought cows thinking that milk would be in high demand in the future. Should the citizen be penalized for his or her foresight? He got into the milk business because he thought it was a good business. IF HE OR SHE THOUGHT THAT THE GOVERNMENT WOULD CONSIDER HIS HIGH PROFITS A "WINDFALL", HE WOULD NOT HAVE GOTTEN INTO THE BUSINESS IN THE FIRST PLACE, BECAUSE IT WAS THE EXPECTATION OF HIGH DEMAND FOR MILK THAT CAUSED HIM TO BUY THE COWS. This, in a nut shell, is how the foreign companies view the sitation. This has nothing to do with being "aggressive". THIS HAS NOTHING TO DO WITH DEPRIVING THE MONGOLIAN PEOPLE OF THEIR RESOURCES. This is simply how the mining business operates. Companies invest in exploration and mining expecting that they will be rewarded when they sell the metal. I am a shareholder of Ivanhoe Mines. I implore the Mongolian government and people not to penalize the foreign mining companies for having the foresight to explore in Mongolia. They did so partly knowing that China is next door and that China would have a need for metal commodities. It is the possibility of a high return that causes businesses to invest. The current high prices of Gold and Copper are not a "windfall" -- they DID NOT FALL OUT OF THE SKY. They were a known possibility and factor that was considered in the exploration. Robert Friedland invested in Oyu Tolgoi AFTER IT HAD BEEN REJECTED BY BHP BILLITON as a bad prospect. He would not have taken a chance on a property that had been rejected by the biggest mining company in the world unless there was a chance of a great reward. Therefore, OYU TOLGOI WOULD STILL NOT BE DISCOVERED IF THE INVESTOR DID NOT PURCHASE THE LICENSE FOR THE POSSIBILITY OF A HIGH REWARD BASED ON HIGH METAL DEMAND. Well, I believe I have made my point. I know people will respond that Ivanhoe stands to make too much money, which will "rob" the Mongolian people. However, there is no intention rob, there is only intention to run a business in the way it is run in America, in Canada, and in Australia and many other places. If the Mongolian people take the position that they do not want business to run in the manner it does in America, Canada, etc., they should have told that to the foreign companies in the beginning. If this new law remains standing, it is the Mongolian people who will have the real windfall through bad faith and hypocritical legislation, not the foreign companies.
with all due respect to both the foreign companies and the Mongolian people,
Aldarion
No comments:
Post a Comment