Reuters reported that Rio Tinto is fighting a legacy of bad publicity as it tries to persuade the Mongolian public USD 10 billion copper deposits it took over from Ivanhoe Mines last year is in safe hands.
Some Mongolian politicians have bridled at the idea of giving away most of the Oyu Tolgoi mine the world's biggest untapped copper deposit to foreign firms and Rio Tinto has been trying to win the PR war.
Mr Luvsandendev Sumati a Mongolian pollster said that "Rio inherited a quite difficult situation over the Oyu Tolgoi mine. I think they have a really difficult task to change public opinion in their favor."
A petition by 20 MPs last month called for Mongolia to boost its share in Oyu Tolgoi from the current 33% and the government has agreed to re open talks. Rio Tinto, one of the world's leading producers of copper, iron ore, aluminium and gold, has built up 49% stake in Ivanhoe Mines which owns two thirds of the Oyu Tolgoi property after an investment agreement signed in 2009.
When Rio took full control of the project late last year, it brought along its own brand of public relations savvy, reversing a more combative approach taken by Ivanhoe and its chief executive Mr Robert Friedland.
Mr Sumati said that part of Rio's public relations problem concerned Friedland who bought the exploration licence for Oyu Tolgoi from BHP Billiton more than a decade ago following a collapse in copper prices. I would say the perception of Ivanhoe is rather negative because of certain announcements by Friedland in international communities which reached Mongolia.
He said that Mongolians were particularly angered by Friedland's comment that the nice thing about is that there are no people around, the land is flat, there's no tropical jungle there's no NGOs. The market expects Rio to bid for full control of Vancouver based Ivanhoe once a standstill agreement expires next January.
Mr Andrew Harding chief of Rio's copper division played down talk that rifts with Ivanhoe were hurting the project. The takeover of Oyu Tolgoi's management was a natural move. Ivanhoe is a company with probably 60 people. Rio Tinto is a company with 77,000 people and established systems for mine management.
The Oyu Tolgoi project expected to produce 400,000 tonnes of copper a year over its 50 year lifespan has transformed the South Gobi region, covering its bleak landscape with roads, pylons, construction camps, residential buildings and warehouses.
Mr Cameron McRae Rio's Mongolia country manager and CEO of Oyu Tolgoi LLC the entity running the mine said that the project would contribute about 5 percentage points of annual GDP growth for at least a decade but the company also sought to stress its social commitments. It has set up a microfinance facility for local businesses and is also setting up colleges and vocational training. If you want a workforce that is healthy and productive and mentally well adjusted to working in the mine industry you are going to have to invest in it.
Rio is studying the environmental impact of the project but opponents remain concerned about local water supplies. The company said just a third of a newly discovered aquifer around 70 kilometer from the project would be used during the mine's lifespan but Mr Munkhbayar an activist who has been campaigning against the mining sector disputed the figures. He said that the Gobi's water resources will be used in full in 7 to 10 years and that's why they are trying to divert water from central and northern regions.
Rio is also trying to counter the perception that the project just 80 kilometers from the country's border with China will bring more benefits to Beijing than Ulan Bator. While it makes economic sense to focus on China, currently Mongolia's only viable market the government has to balance its financial interests with its geopolitical ones.
It has already sought out other options when it comes to its other major strategic resource, the nearby Tavan Tolgoi coal mine and plans to build train routes that will provide access to Russia's rail network and its far eastern ports.
Mr McRae said that China remained Mongolia's only natural market. The real issue was building the infrastructure that will deliver copper to the border and allow Mongolia to sell at international prices rather than at a discount.
Ms Dugersuren Sukhgerel ED of non government organization known as Oyu Tolgoi Watch said that whatever the economics involved, the suspicion remains that Chinese interests are being prioritized. If you look at the international and domestic discussions, it is clear that the only reason we are trying to attract investment is because we have a huge and hungry market in the south China.
(Sourced from Reuters)
