Ivanhoe points Rudd to Mongolia mine tax
The Rudd government should take heed of Mongolia's failed attempt to impose a hefty windfall profits tax on mining companies, Ivanhoe Australia Ltd says.
Its Canadian parent company, Ivanhoe Mines Ltd, hit a brick wall with its massive Oyu Tolgoi copper and gold project in Mongolia in 2006 when the Mongolian government flagged a "windfall tax" of up to 68 per cent on mining profits, when commodity prices reached certain levels.
The tax was announced as Mongolians protested against increasing levels of foreign ownership of mineral assets.
But the path for developing Oyu Tolgoi was cleared in August 2009, when the Mongolian government scrapped the tax after realising it was hurting the mining sector, including the jointly Mongolian and Russian government-owned mining company Erdenet Mining Corporation.
The Mongolian government instead later agreed to take 34 per cent of Ivanhoe Mines Mongolia Inc LLC, the licence holder of the Oyu Tolgoi project, which is a joint venture between Ivanhoe Mines and Rio Tinto Ltd.
Oyu Tolgoi was originally scheduled to be commissioned in 2009.
But because the joint venture's negotiations with the Mongolian government took so long, the mine will now start production in 2013 - a decade after the deposit was discovered by the Robert Friedland-chaired Ivanhoe Mines.
Peter Reeve, chief executive of Ivanhoe Mines' Australian arm, said domestic miners felt "kicked in the teeth" by the heavy-handed Resources Super Profit Tax proposal.
He says the federal government should take heed from Mongolia's windfall tax experience.
"They (the Mongolian government) saw the potential issues around that and they modified their position," Mr Reeve told AAP on Tuesday.
"But there has been no modification here."
Ratings agency Moody's last week said the federal government should note that mining exploration in the African nation of Zambia fell following a large rise in resource taxes in 2008.
Other jurisdictions, including India, recently indicated they're considering mining royalty increases.
PriceWaterhouseCoopers Australian and Global Mining Leader Tim Goldsmith said on Tuesday that taxation could be "a tremendous lever in determining a country's attractiveness as an investment destination".
"Clearly sovereign risk will be a much greater consideration across more jurisdictions in future," Mr Goldsmith said.
By Rebecca Le May
PERTH, May 25 AAP
May 25 2010, 6:21PM
Its Canadian parent company, Ivanhoe Mines Ltd, hit a brick wall with its massive Oyu Tolgoi copper and gold project in Mongolia in 2006 when the Mongolian government flagged a "windfall tax" of up to 68 per cent on mining profits, when commodity prices reached certain levels.
The tax was announced as Mongolians protested against increasing levels of foreign ownership of mineral assets.
But the path for developing Oyu Tolgoi was cleared in August 2009, when the Mongolian government scrapped the tax after realising it was hurting the mining sector, including the jointly Mongolian and Russian government-owned mining company Erdenet Mining Corporation.
The Mongolian government instead later agreed to take 34 per cent of Ivanhoe Mines Mongolia Inc LLC, the licence holder of the Oyu Tolgoi project, which is a joint venture between Ivanhoe Mines and Rio Tinto Ltd.
Oyu Tolgoi was originally scheduled to be commissioned in 2009.
But because the joint venture's negotiations with the Mongolian government took so long, the mine will now start production in 2013 - a decade after the deposit was discovered by the Robert Friedland-chaired Ivanhoe Mines.
Peter Reeve, chief executive of Ivanhoe Mines' Australian arm, said domestic miners felt "kicked in the teeth" by the heavy-handed Resources Super Profit Tax proposal.
He says the federal government should take heed from Mongolia's windfall tax experience.
"They (the Mongolian government) saw the potential issues around that and they modified their position," Mr Reeve told AAP on Tuesday.
"But there has been no modification here."
Ratings agency Moody's last week said the federal government should note that mining exploration in the African nation of Zambia fell following a large rise in resource taxes in 2008.
Other jurisdictions, including India, recently indicated they're considering mining royalty increases.
PriceWaterhouseCoopers Australian and Global Mining Leader Tim Goldsmith said on Tuesday that taxation could be "a tremendous lever in determining a country's attractiveness as an investment destination".
"Clearly sovereign risk will be a much greater consideration across more jurisdictions in future," Mr Goldsmith said.
By Rebecca Le May
PERTH, May 25 AAP
May 25 2010, 6:21PM
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