Polo To Sell Stake In Mongolian JV

Polo To Sell Stake In Mongolian JV

Polo Resources is to sell its 50 per cent interest in its Mongolian joint venture with Peabody Energy to Winsway Coking Coal Holdings for the sale of Polo's 50% interest

The JV was formed to hold all of Polo's coal and uranium assets in Mongolia.

Winsway will pay a non-refundable deposit of $1.75m to Polo, which has granted exclusivity to July 20.

Polo chairman Neil Herbert said, 'We are pleased to be executing the divestment of our non-core holding in the joint venture in Mongolia.

'Polo is focused on maximising shareholder value through its uranium and coal interests in Extract Resources Limited, GCM Resources plc and Caledon Resources plc and currently has approximately $23m in cash.'

Polo, Peabody and Winsway will negotiate the terms of a sale of Polo's interests in the JV for $15m in cash, including the deposit, and $20m payable within 12 months.

In addition Polo will receive a 1% royalty for coal sold from the licences.

Ivanhoe, Rio Tinto Finalise Oyu Tolgoi Deal

$5Billion Mongolian Copper-Gold Project Set To Go Ahead

Ivanhoe Mines and its partner, Rio Tinto, have finalised procedural and administrative conditions in their investment agreement with the Mongolian government to develop the Oyu Tolgoi copper-gold project. Full-scale construction is set to begin in the second quarter of 2010, the company said on Wednesday.

The Mongolian government will become a junior partner in the $5 billion project with a state-owned resource company owning a 34 per cent stake in the Ivanhoe Mines subsidiary, Oyu Tolgoi LLC. Ivanhoe owns the remaining 66 per cent while Rio Tinto has a 22 per cent stake in Ivanhoe and will provide financial and technical support for the project. Rio Tinto has an option to increase its stake in Ivanhoe to 46.6 per cent over the next 19 months.

The partnership have approved an initial $758 million to launch full-scale construction of the complex

Production of copper and gold is expected to begin in 2013 with a five year ramp up to full production of 450,000 tones of copper per year with significant gold by-products.

Included as part of the project’s infrastructure is a 105 km highway linking the Oyu Tolgoi complex with the Mongolia-China border as well as a regional airport capable of handling Boeing 737-sized aircraft.

Arch Coal Bids $86 Million For Otter Creek Coal Tracts

US coal miner, Arch Coal, has bid $86 million plus future royalties for the right to mine half a billion tons of coal at the Otter Creek tracts near Ashland in the American state of Montana. The miner already has the rights to a neighbouring tract of 731 million tons.

Last month, Arch refused to pay a $143 million royalty to mine the coal.

The Montana Land Board meets Thursday to consider Arch's bid.

Chinalco Confirms Guinea, Mongolia Talks

Chinese state-owned nonferrous metals company, Chinalco, has said it is in talks with Rio Tinto about potential joint ventures in Mongolia and Guinea, according to reports in a Chinese newspaper on Wednesday.

The Oriental Morning Post quotes vice-president Lu Youqing as saying the companies are talking about developing joint-ventures for the Mongolian Oyu Tolgoi copper-gold project as well as the Simandou iron ore mine in Guinea.

Mongolia To Keep Tavan Tolgoi In State hands

As expected Mongolia has announced that it aims to keep the Tavan Tolgoi coal deposit entirely in state hands. Prime Minister Sukhbaatariin Batbold told the Mongolia Economic Forum that the decision would enable to nation to take a greater return from the 6.5 billion tonne project.

"The 100 percent stake ownership option for Tavan Tolgoi is to ensure that we will benefit from value-added production. The option has been suggested and recommended to the task force responsible." The plan will put before parliament for approval.

Mongolia had previously planned to sell a 49% stake in the project in a deal that would have been worth as much as $2 billion.

Development of the country’s considerable mineral deposits has been slowed by deadlock over the Oyu Tolgoi copper and gold project. Last year the government finally signed a deal to develop Oyu Tolgoi with Ivanhoe Mines and Rio Tinto.

Bidders for Tavan Tolgoi included BHP Billiton, Jindal, Vale, Peabody and Shenhua as well as consortia from Korea, Russia and Japan however the country now looks to go down the contract-mining route with a global miner who won’t be expected to take an equity stake.

Tavan Tolgoi consists of coking coal which is largely used by the steel industry.

Mongolia Looking To Keep Tavan Tolgoi Under State Control

Mongolia’s government seems to be edging towards keeping its huge Tavan Tolgoi coal project under state control. A spokesman in Ulan Bator has told Reuters that of the two options available to the government the option of selling a 49% stake appears to be receding with Prime Minister Sükhbaataryn Batbold preferring to keep 100% in the hands of the government.

A number of multinational coal companies such as BHP Billiton, Peadbody and Shenhua all expressed an interest in bidding for the 49% stake in Tavan Tolgoi, one of the biggest undeveloped coal resources in the world with an estimated reserve of 6.4 billion tonnes.

Should the government retain its 100% stake it is likely to hire Australian contractor Leighton to develop the coal field.

Lotus Acquires Mongolia Fluorspar Licence

Lotus Resources has completed the acquisition of a further fluorspar mining licence for $70,000.

The licence has been transferred to Lotus Minerals Mongolia LLC, its wholly owned subsidiary company in Mongolia.

The Tsagaan Chuluut mining licence is located in Dornogobi Province, Mongolia and is approximately 400 km south-east of Ulaanbaatar, Mongolia's capital and largest city.

The Tsagaan Chuuluut project area is located in a geological province that is known for its fluorspar mineralisation endowment.

The deposit is genetically and morphologically very similar to the country's largest fluorspar mine (Bor-Ondor) which is located about 70km to the west-northwest of Tsagaan Chuulut.

Lotus has also increased its shareholding in the Lotus Bayalag LLC joint venture from 65% to 80%.

Lotus has agreed to acquire the 15% stake for $15,000.

An exploration plan has been prepared for this project which will start later this year.

Source: IB Times

Ivanhoe Set To Begin Work On Mongolia Copper-Gold Mine

Ivanhoe Mines will begin full-scale construction at the Mongolian Oyu Tolgoi copper-gold mining complex in 2010, with a year-long budget of US$758 million.

The Vancouver-based company said the 2010 budget, approved with its partner Rio Tinto PLC, provides for an early start on a site-wide development program at the southern Mongolian mining complex.

“The approval of the 2010 construction budget represents the next big step toward bringing this project into production,” said president and CEO John Macken.

“Ivanhoe is considering a schedule that could see construction of the initial open-pit mine completed in 2012 and commercial production begin in 2013.”

Work in 2010 is planned to include pouring concrete for the foundation of the 100,000 tonne-per-day concentrator, installation of a 20-megawatt power station and 35-kilovolt distribution system and construction on a highway link to the Mongolia-China border and a regional airport.

Ivanhoe Mines recently signed the long-awaited deal with Mongolia to develop the Oyu Tolgoi project after a heated national debate over how to exploit the country’s mineral wealth.

The agreement on the gold and copper mine in the Gobi desert was renegotiated repeatedly after opponents complained it shortchanged Mongolia, which lies wedged between Russia and China and has long been wary of foreign domination.

Ivanhoe Mines also has an 80 per cent stake in SouthGobi Energy Resources Ltd., focused on exploring and developing metallurgical and thermal coal deposits in Mongolia and Indonesia.

Source: Canadian Press

Mongolia Energy Signs Coal Mining Agreement

Mongolia Energy Corp., the Hong Kong-traded mineral and energy explorer, signed a $206 million agreement with a contract miner to extract coal from its pit in the west of the country.

The six-year agreement with a unit of Leighton Holdings Ltd., Australia’s largest construction company, is initially to mine 3 million metric tons of coal a year from the Khushuut pit. Production will likely start in the second quarter next year, Mongolia Energy’s Chief Executive Officer James Schaeffer said at a media briefing in Hong Kong today.

Mongolia Energy is developing the mine and owns 330,000 hectares of mineral and energy concessions in the resource-rich north Asian country. The agreement allows for production to rise to 8 million tons of coal a year.

“There’s an enormous market for coal in China and Mongolia is sitting right on its doorstep,” said Hamish Tyrwhitt, managing director of Leighton Asia Ltd. “It’s in fantastic position. Mongolia has incredible commodity resources.”

Total investment in the Khushuut mine will likely reach $2.85 billion over its estimated lifetime of 19 years, said Mongolia Energy’s general counsel, Mohan Datwani.

The coking coal will likely be sold in the northwestern Chinese province of Xinjiang and $111 million has been spent this year building a road between the pit and China.

Mongolia Energy hopes to extend the contract beyond the initial six years, Schaeffer said.

Shares in Mongolia Energy rose the most in a month in Hong Kong on Nov. 9 after an analyst report that billionaire Cheng Yu-teng had increased his stake in the company.

Cheng owns 3.7 percent of the company’s shares, according to data compiled by Bloomberg. Cheng controls property developer New World Development Co.

The shares have gained 55 percent in Hong Kong trading this year, compared with the 57 percent increase in the benchmark Hang Seng index.

Mongolia Energy’s coal reserves at Khushuut are estimated at 460 million tons and could generate $240 million in revenue next year if prices remain stable, according to a research note by Timothy Kwai, an analyst at Quam Securities in Hong Kong.

Source: Bloomberg

India's JSPL In Race For Mongolian Coal Project

Naveen Jindal-controlled Jindal Steel & Power Ltd (JSPL) is in the race for Mongolia’s Tavan Tolgoi coal project, one of the 10 biggest deposits in the world.

Vikrant Gujral, vice-chairman and CEO, JSPL, said: “We had made a presentation before the Group of Ministers. We have been informed that we are one of the shortlisted bidders for a 49 per cent stake in Tavan Tolgoi. This is a big deposit and we are the only Indian company to be shortlisted.”

Tavan Tolgoi has six billion tonnes of coal, of which two billion is coking. The balance 51 per cent stake would be held by a government-owned company. Though Gujral did not specify the value of the deal, pointing out that this would have to be studied, industry sources said it could run into billions of dollars as it is an operational mine. He said most Indian companies have been eyeing smaller mining companies, while adding BHP and Brazil’s Vale were also in the fray.

Gujral said the coking coal could be transported to cater to JSPL’s steel plants in India. However, he pointed out that Mongolia is a land-locked country and the mineral would have to be routed through either China or Russia.

JSPL operates a three-million-tonne plant at Chhattisgarh and has lined up two six-million-tonne plants for Orissa and Jharkhand, for which Memoranda of Understanding have been signed. Moreover, there are plans to add another three million tonnes at Chhattisgarh.

Indian steel companies have been scouting for raw material assets overseas in the past few years. Coking coal accounts for around 50 per cent of the raw material costs and proven reserves of prime coking coal in India are at 4.6 billion tonnes, but production is around seven million tonnes only. Also, the quality of Indian coking coal is poor and has to be blended with imported coal

Source: Business Standard

Ivanhoe Targets 20 Million Tonnes Of Mongolia Coal

-- Ivanhoe Mines Ltd., developing a $4 billion copper and gold mine in Mongolia with Rio Tinto Group, is targeting long-term coal production of 20 million tons a year from the country.

The company, through its SouthGobi Energy Resources Ltd. unit, wants to supply 1 percent of China’s coal supply within 10 years, Chairman Robert Friedland said today in an interview in Beijing. China is the world’s biggest coal consumer.

Mongolia may become the “Saudi Arabia of coal,” Friedland said earlier at the China Eurasia Investment Forum.

SouthGobi’s Ovoot Tolgoi mine, located 45 kilometers (28 miles) north of the border with China, has 114.1 million metric tons of coal reserves, according to an October presentation on the company’s Web site. It’s targeting sales of almost 15 million tons by 2015.

Third-quarter coal sales from Ovoot Tolgoi were forecast to rise 17 percent to 450,000 tons, according to the presentation.

Ivanhoe Mines, based in Vancouver, owns 80 percent of SouthGobi.

Source: Bloomberg

Mongolia To SIgn Oyu Tolgoi Deal This Week

Mongolia's government is going to sign a key investment agreement for the $4 billion Oyu Tolgoi copper-gold mine on Tuesday, Oct. 6, a spokesman for Mongolia's president said Saturday.

"On Tuesday will be the signing ceremony. This day is the best day to do a big job," the spokesman told Dow Jones Newswires, referring to the Buddhist calendar.

Mongolia is rich in a range of resources, including coal, gold, iron ore, zinc and uranium, and the agreement for Oyu Tolgoi will act as a blueprint for billions of dollars of investment into the impoverished country that shares a border with China.

Oyu Tolgoi's owner, Ivanhoe Mines Ltd. and joint-venture partner Rio Tinto PLC have been waiting for years to sign an investment framework, spelling out taxation and government involvement for the mine, set to produce 450,000 metric tons of copper annually with a mine life of 45 years.

Rio currently holds a 9.9% stake in Canada-based Ivanhoe, with an option to raise that to just over 45%.

Source: Marketwatch

Ivanhoe Share Price Rises On Mongolia Agreement

Ivanhoe Mines Ltd. share price rose to its highest price in almost a year in Toronto after saying changes to Mongolia’s laws will help it complete an investment agreement on the Oyu Tolgoi copper-gold project “in the near future.”

Mongolia’s lawmakers approved amendments that will eliminate a three-year-old, 68 percent windfall profit tax on copper and gold effective Jan. 1, 2011, Vancouver-based Ivanhoe said today in a statement. Ivanhoe has tried for more than six years to reach an agreement with Mongolia to develop Oyu Tolgoi and benefit from demand in China, the biggest metals buyer.

“This is it,” Dale Choi, an economist at Frontier Securities in Ulan Bator, said in a phone interview today. “Parliament had been the stumbling block” in allowing concessions sought by Ivanhoe and development partner Rio Tinto Group, which include elimination of the windfall tax and rights to build roads and use water, Choi said.

Oyu Tolgoi is about 80 kilometres (50 miles) north of Mongolia’s border with China. Ivanhoe in March 2008 estimated the copper resources in the project at 78.9 billion pounds and the gold resources at 45.2 million ounces. London-based Rio Tinto called Oyu Tolgoi “the world’s largest undeveloped copper-gold resource” when it agreed to buy 10 percent of Ivanhoe in 2006.

“This expression of confidence in Mongolia’s future clears the way for finalization of an agreement with the government for the construction and operation of Ivanhoe’s Oyu Tolgoi copper- gold complex,” Ivanhoe Chief Executive Officer John Macken said in the statement. “We are in a position to make arrangements with the Government to sign the Oyu Tolgoi Investment Agreement in the near future.”

Rio said in a separate statement that production “is expected to commence as early as 2013 with an approximate five- year ramp-up” to full capacity. Oyu Tolgoi’s average production capacity over the entire mine life is estimated at 450,000 metric tons of copper per year and 330,000 ounces of gold, the company said.

Copper for delivery in three months on the London Metal Exchange has doubled this year, partly on government stimulus spending and stockpiling in China. Copper fell 1.8 percent to $6,311 a ton today on the LME.

Oyu Tolgoi “is right next to the consumer of all of the copper concentrate the companies can produce there,” Frontier’s Choi said.

Refined copper imports by the Chinese more than doubled to 1.78 million metric tons in the first half and reached a monthly record of 378,943 tons in June, customs data show.

China’s manufacturing expanded for a fourth month in June as a 4 trillion yuan ($585 billion) government stimulus package and record bank lending revived the world’s third-largest economy. Inflation concerns and economic growth of 7.9 percent in the second quarter also boosted demand for commodities.

Under a 2007 draft investment agreement for the project, the Mongolian government would have had the right to a 34 percent equity stake in the project and related taxes equivalent to 55 percent of the profits, Rio Chief Executive Officer Tom Albanese said in February 2008.

Neither company’s statement today said how large the Mongolian government’s stake will be.

Ivanhoe spent $156 million on exploration and development at Oyu Tolgoi, the company said in an April 1 statement. Engineers at the site completed the construction of a shaft to a full planned depth of 1,380 meters in February 2008.

Source: Bloomberg

Rio, Ivanhoe Win Approval For Oyu Tolgoi Project

Rio Tinto Group, the world’s third-largest mining company, and Ivanhoe Mines Ltd. have won approval from Mongolia’s parliament to develop the $3 billion Oyu Tolgoi copper deposit, Ivanhoe said.

Lawmakers present voted 63 percent in favor of “a resolution that authorizes the government of Mongolia to conclude a long-term, definitive investment agreement with Ivanhoe Mines and Rio Tinto for the development and operation of the Oyu Tolgoi copper-gold mining complex in southern Mongolia,” Vancouver-based Ivanhoe said in a statement.

Ivanhoe has been trying for more than five years to win an investment agreement from Mongolia to develop Oyu Tolgoi and benefit from demand in China, the biggest metals buyer. London- based Rio called Oyu Tolgoi “the world’s largest undeveloped copper-gold resource” when it agreed to buy 10 percent of Ivanhoe in 2006.

Under a 2007 draft investment agreement, the government would have had the right to a 34 percent equity stake in the project and related taxes equivalent to 55 percent of the profits, Rio Chief Executive Officer Tom Albanese said in February 2008.

Mongolian President Tsakhiagiin Elbegdorj said last month he wants to change the terms to allow the government to take 50 percent of the profit, rather than buy an equity stake.

Oyu Tolgoi is about 80 kilometres (50 miles) north of Mongolia’s border with China. Ivanhoe in March 2008 estimated the copper resources in the project at 78.9 billion pounds and the gold resources at 45.2 million ounces.

SourcE: Bloomberg

Ivanhoe Close To Mongolian Approval

Ivanhoe Mines Ltd said on Thursday that the Mongolian government has moved a step closer to approval of its flagship Oyu Tolgoi copper-gold project.

The Canadian exploration company said Mongolia's parliament has voted to advance approval discussions of the comprehensive investment agreement relating to the project, located in the South Gobi region.

Under Mongolian law, the agreement will now be presented for its first official reading. However, it is still unclear how long parliament, the State Great Khural, will take to discuss the proposal before voting on it.

Ivanhoe's fortunes depend to a great extent on the success of Oyu Tolgoi and the financial strength of its partner, Rio Tinto, which owns about 10 percent of Ivanhoe. Rio could boost that stake to above 40 percent by meeting funding commitments for the Mongolian project.

Under the terms of the current proposal -- which revives a similar agreement that fell apart early last year -- Mongolia would take a 34 percent stake in Oyu Tolgoi, which is expected to produce an average of at least 440,000 tonnes of copper and 320,000 ounces of gold over a 35-year mine life.

Ivanhoe's shares, which have risen about 200 percent year-to-date on speculation that approval is imminent, rose 5.9 percent to C$9.50 on the Toronto Stock Exchange on Thursday morning.

Source: Reuters

Mongolian President Wants To Change Mine Agreement

Mongolia's president-elect wants to change a proposed gold and copper mining agreement with Rio Tinto and Ivanhoe Mines, according to a report on Wednesday.

President-elect Tsakhia Elbegdorj is not in favor of the Mongolian government buying a 34 percent equity stake in the Oyu Tolgoi gold-copper project in Mongolia, Bloomberg News reported on its website.

He would rather see the government taking 50 percent of the profits from the project, according to the article, based on interview with the president-elect.

Ivanhoe has been trying for more than five years to complete an investment agreement with Mongolia to develop the Oyu Tolgoi deposit, located about 80 kilometres north of the border with China.

Rio Tinto holds a 10 percent stake in Ivanhoe and can increase its stake to more than 40 percent by meeting funding objectives.

Vancouver-based Ivanhoe in March 2008 estimated the copper resources in the project at 78.9 billion pounds and the gold resources at 45.2 million ounces.

"I am not in favor of that," Elbegdorj said in an interview from the Mongolian capital of Ulan Bator. "I think an equity share is not a good proposal."

Elbegdorj defeated incumbent Nambaryn Enkhbayar in the May 24 presidential election, and will be sworn in Thursday.

Oyu Tolgoi is expected to produce an average of at least 440,000 tonnes of copper and 320,000 ounces of gold a year over a 35-year mine life.

Source: Reuters

Russia Eyes Mongolia's Uranium

Russia's state rail monopoly signed a deal potentially totalling $7 billion on Wednesday to upgrade Mongolia's rail network and improve access to untapped deposits of uranium, coal and other minerals in the Gobi desert.

Mongolian Prime Minister Sanj Bayar also proposed a separate partnership to extract uranium, offering Russia access to its deposits of the metal as the Kremlin seeks to position itself as a major supplier to the growing nuclear fuel industry.

"We should switch to new technologies, improve management and approach new metal and coking coal deposits," Russian Prime Minister Vladimir Putin said during an official visit to the Mongolian capital.
"And to raise the attractiveness of Mongolia, transport should of course be modernised."

Mongolia, with annual per capita income of about $1,200, hopes its vast reserves of uranium, coal, copper and gold will help pull its 3 million people out of poverty.
But as the value of these metals has dropped, cutting export revenues, it has turned to nearly $1 billion in foreign loans.

Russian Railways agreed to form a joint venture with Mongolia's national rail company, MTZ, and state-owned mining company Erdenes MGL. The Russian company will spend $1 million on an initial feasibility study.

"The whole project is expected to cost around $7 billion, depending on the feasibility study," Russian Railways President Vladimir Yakunin told reporters.
He said the upgrade would improve access to Tavan Tolgoi, where estimated coal reserves of 6.5 billion tonnes rank it as the world's largest untapped deposit of the type of coal used by steel makers in their blast furnaces.

Mongolia has hired JPMorgan and Deutsche Bank to sell up to 49 percent of the project. Russian firms have expressed interest, as well as coal giant China Shenhua, U.S. miner Peabody Energy and BHP Billiton.

Russia has already agreed to extend a $300 million loan to support the agricultural sector in Mongolia, which employs 37 percent of the population.

Mongolia also appears keen to accelerate work on mining its uranium. Prime Minister Bayar told Putin: "We should speed up the work on a joint venture to develop uranium deposits."

Putin said state nuclear corporation Rosatom would represent Russian interest in the project. Asked when a deal might be signed, he said: "It is a matter of weeks."
Neither Putin nor Bayar gave further details of the project.

Moscow has been trying to break into the prosperous nuclear markets of the United States and European Union, and has been eyeing possible alliances in the world market.

Russia holds more than 10 percent of the world's uranium reserves. It is also among the world's biggest providers of enrichment services and has ventured abroad to seek additional raw materials.

Australia, which holds 40 percent of the world's known uranium reserves, signed an agreement in 2007 to expand sales to Russia, but Canberra has since put the deal on hold due to concerns Moscow might not honour non-proliferation obligations.

Source: The Guardian

Mineral Output Down As Mongolia's Economy Shrinks

Government figures indicate that Mongolia’s industrial output shrank 7.6 percent in the first four months of 2009.

Industrial output during this period was $334 million, a decrease of $27 million over the same period last year.

Government officials attributed the decrease to a $5.7 million or 2.9 per cent reduction in mining and quarrying and $23 million drop in manufacturing.

Decreased mining output was mainly focused in minerals such as crude oil, copper concentrate, gold, fluor spar concentrate, and zincum concentrate.

At the same time, there was a reduction in output in manufactured products such as carpet, wheat flour, beer, wine, soft drinks, cigarettes, railway sleepers, cement, lime, articles of iron concrete and metal beds.

Source: Mongolia-Web

Australia Set To Export More Coking Coal To China

Exports to China of Australian coal used in steelmaking are set to rise sharply, replacing Mongolia as its top supplier, brokerage Goldman Sachs JB Were said in a report on Wednesday.

It said that after averaging just over 6 million tonnes a year for the past five years, China's imports of coking coal are expected to exceed 13 million tonnes in 2009.

"Australia should be the main beneficiary of this growth, accounting for almost 6 million tonnes of the additional 6.5 million tonnes of foreign coal that we expect to flow into China this year," Goldman said in the report.

Canada and Mongolia are also likely to ship more coking coal to China this year, but their share of the Chinese import market looks set to fall as Australia becomes China's leading foreign coal supplier. Mongolia has been China's largest foreign supplier for the past three years, according to the report.

China's small coking coal mines are struggling to comply with increasingly stringent safety standards and challenging geological conditions, meaning domestic suppliers were unable to match projected demand growth from Chinese coke makers, it said.

Total shipments of hard coking coal from Australia to China are forecast to climb to a record 7.3 million tonnes this year, meaning China could account for almost 10 per cent of all Australian exports, up from one per cent last year and a previous high of five per cent in 2004, the report said.

China has been buying Australian coking coal at $US105-$US115 per tonne, cost, insurance and freight, which translates into $US97-$US107 per tonnes free on board, the brokerage said, citing sector research group McCloskey Coal.

At that price, a solid floor existed for spot hard coking coal prices of around $US100 per tonne FOB Queensland, it said.

Goldman also forecast a 2010/11 contract price of $US120 per tonne for Australian hard coking coal.

Source: Business Spectator

Mongolia's Mining Hopes Hinge On Oyu Tolgoi

Mongolia's ambition to be a mining powerhouse may be hampered if it fails to quickly approve a $3 billion copper and gold project that has become a symbol of the difficulties of investing in the landlocked, mineral-rich country.

The Oyu Tolgoi proposal, a joint project between Ivanhoe Mines and Rio Tinto and endorsed by Mongolia's cabinet and National Security Council, is now in front of the parliament. A final decision is expected during this parliamentary session following years of bureaucratic infighting.

At issue is the extent of ownership Mongolia will ultimately demand, and the precedent that demand will set for future negotiations with regional and global players such as BHP Billiton and China Shenhua Energy Co Ltd -- who are hungry for a slice of the country's vast untapped mineral deposits.

"Oyu Tolgoi has become a burden, and until Oyu Tolgoi is approved, nothing else is going to move forward," Gerald Harper, senior vice president, Mongolian operations, for uranium miner Western Prospector Group Ltd, said at a recent conference in Hong Kong.

"Mongolia is very much focused on the concern that time is money," Harper added. "Given maybe a two-year delay before we get an investment agreement, followed by a three-year construction period, there's the possibility that we'll miss the next upcycle."

Rio Tinto and Ivanhoe both declined to comment.

Government officials say the delays are a result of wanting Oyu Tolgoi to set an example for other major deals that follow.

"This contract should become an exemplar and model contract for the exploitation of other strategically important big deposits," Badamsuren Khookhor, Mongolian parliament member and a leader of the Oyu Tolgoi working group, told Reuters.

"Some issues needed to be clarified," he added, referring to a combination of ownership, taxation and infrastructure-related issues that have held up the decision. "It should be perfected and discussed and approved promptly."

Mongolia's main export is copper, and mining at its peak accounted for 40 percent of government coffers even though fewer than 2 percent of Mongolians were formally employed in the sector.

Mongolia, whose annual per-capita income is about $1,200, wants to pull its 3 million people out of poverty with the country's uranium, lead, zinc, copper, gold, and coal deposits.

And it needs investment now more than ever, analysts say.

Nearly $1 billion in foreign loans and grants are tiding Mongolia through a collapse in mineral prices as the financial crisis crushes the value of its exports.

In the short term, the loans ease budgetary pressure, making the government less dependent on revenues from mining contracts to address the country's immediate needs.

Oyu Tolgoi will be Mongolia's largest foreign investment, with development costs reaching $7.3 billion. Ivanhoe initially struck a deal to develop the mine in 2006, but that pact was withdrawn last year when Mongolia sought more favourable terms as copper and gold prices soared.

The country's contentious 2006 mining law allows the state a share of up to 34 percent of deposits found with private funds and up to 50 percent of those discovered with state funds.

Investors expect a decision to be made soon to get their own projects off the ground. But with a presidential election scheduled for May 24, the government is distracted, making another delay likely, analysts say.

"It just pushes back the start date for a new wave of investment," said Andrew Driscoll, CLSA's head of resources research.

Oyu Tolgoi is just the beginning for Mongolia's government.

Looming on the horizon is a decision on Tavan Tolgoi, known as the world's biggest untapped coking coal deposit, with a coal reserve of 6.5 billion tonnes in the Gobi desert.

Mongolia has hired JP Morgan and Deutsche Bank to sell up to a 49 percent stake in the mine, which is drawing bids from Chinese coal giant China Shenhua, Peabody and world No.1 miner BHP Billiton, among others.

Negotiations for Oyu Tolgoi and Tavan Tolgoi have dragged on for years, outlasting the commodity boom as Mongolia sought the revenues that eluded it with previous mining projects.

In the longer term, Oyu Tolgoi and Tavan Tolgoi will be vital to Mongolia's ability to repay the loans, as well as maintain its independence from its two giant neighbours, China and Russia.

Any debates about Tavan Tolgoi could be bogged down by the infrastructure needs of the deposit, sources say.

"The issue is, how many schools are they going to build?" an investment banker with direct knowledge of the deal told Reuters.

But for now, lack of an official word on Oyu Tolgoi weighs.

"People are expecting that it should become a good contract that matches with interest of Mongolian people," Badamsuren Khookhor of Mongolia's parliament said.

"The public is anticipating its implementation."

Source: Reuters