Cameron McRae President & CEO OYU TOLGOI: PARTNERSHIP BREEDS SUCCESS DISCOVER MONGOLIA 2012
Cameron McRae President & CEO
OYU TOLGOI: PARTNERSHIP BREEDS SUCCESS DISCOVER MONGOLIA 2012
2 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2012, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
RAPID PROGRESS – STRONG PARTNERSHIP EQUALS SUCCESS
3 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2012, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
THE REWARDS OF PARTNERSHIP – BEHIND EVERY NUMBER A HUMAN STORY
• 575m USD spent on an international standard
airport, road to Gashuun Sukhait, a 90km water
pipeline and 220kv power line to China –
Country-wide benefits
• 125m USD for education and training, including
three training and vocational centres - 3300 benefit
• 23m USD spent for social, cultural and economic
development of Umnugobi aimag -
52,000 benefit across the Umnogobi
• 1.3b USD spent with Mongolian suppliers in 2011 -
over 1,000 companies and their employees benefit
• 700m USD to be paid to Government prior to the
completion of the project construction phase 1 –
Country-wide benefits
4 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2012, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
* Source: IDOP Technical Report Assumptions
In 2020, 80 per cent of wealth will come from underground
Open Pit 184kT Cu
Underground 628kT Cu
A PARTNERSHIP FOR FUTURE PROSPERITY
Ready to go Yet to come
5 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2012, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
• Established Government obligations: • Clear legal framework • Stable tax environment (but no tax holiday) • 30 year term, with right to negotiate to go to
50% after that point
• Established Investor obligations on: • National workforce targets • Infrastructure and Regional Development • Education and training • Environmental stewardship • Procurement and national supplier
development
THE INVESTMENT AGREEMENT – THE FOUNDATION OF A STABLE PARTNERSHIP
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-15
-10
-5
0
5
10
15
2001 2006 2011 2016 2021 2026
Actual Forward
Cumulative cash to Government of Mongolia
Important: Includes DIRECT payments from Oyu Tolgoi to Government of Mongolia only. Excludes all indirect cashflow to Government (e.g. taxes paid by Oyu Tolgoi’s employees and suppliers)
Cumulative cash to international investors
Investors take more than two decades to break even
Outcomes presented are based upon assumptions released publicly in Ivanhoe Mines’ March 2012 IDOP Technical Report, and assuming a 10% cost of funding. While there will inevitably be variation from these specific outcomes given differences between IDOP Technical Report price, volume and cost assumptions and future reality, the broad picture will not change.
STABILITY MEANS MONGOLIA BENEFITS FIRST, MOST & RISK-FREE
7 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2012, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
Source: Mongolia The fiscal regime for mining—a way forward, IMF 2010. Confirmed by Oyu Tolgoi modelling
Government of Mongolia International investors *Based on IMF 55-71 per cent projection + cost of funding + multiplier effect
STABILITY AND PARTNERSHIP THAT PAYS – THE GOVERNMENT GETS 55-71% PLUS*
8 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2012, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
Source: Bloomberg
500
700
900
1,100
1,300
1,500
1,700
1,900
Feb
-10
Mar
-10
Ap
r-10
May
-10
Jun
-10
Jul-
10
Au
g-1
0
Sep
-10
Oct
-10
No
v-10
Dec
-10
Jan
-11
Feb
-11
Mar
-11
Ap
r-11
May
-11
Jun
-11
Jul-
11
Au
g-1
1
Sep
-11
Oct
-11
No
v-11
Dec
-11
Jan
-12
Feb
-12
Mar
-12
Ap
r-12
May
-12
2
3
1
1
2
3
Silk Road Mongolia Index /SILKMN/
OT Investment Agreement finalized with its partners to develop the project
TT agreement uncertainty OT Investment Agreement – Parliament attempted renegotiation
Amendments to the FDI law
4
4
Investment Agreement reaffirmed
A STABLE AND SAFE ENVIRONMENT IS ESSENTIAL FOR MONGOLIA TO CONTINUE TO BENEFIT FROM OYU TOLGOI, AND FROM FDI
9 БҮХ ЭРХ ХУУЛИАР ХАМГААЛАГДСАН © 2012, ОЮУ ТОЛГОЙ ХХК COPYRIGHT © 2012 OYU TOLGOI , ALL RIGHTS RESERVED
Business • Pay its fair share
• Grow the economy
• Develop talent
• Share international experience
• Use skills to benefit Mongolia
Government • Guarantee fair returns for the
people of Mongolia
• Create platform for the next wave of investment
• Direct revenues from mineral wealth wisely
Business and Government each have clear roles and responsibilities
REALISING A PROSPEROUS FUTURE – SUCCESS THROUGH PARTNERSHIP
THANK YOU
Visit the Oyu Tolgoi Website: www.ot.mn Follow us on Facebook: www.facebook.com/oyutolgoi Follow us on Twitter: @OTMongolia