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Rio Tinto's annual meeting in Canada to discuss OT issue

Oyu Tolgoi project may not be sustainable until 2022

Rio Tinto's annual meeting in Canada to discuss OT issue
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http://zgm.mn/post/2470/


Rio Tinto executives announced an urgent meeting in Canada to discuss the Oyu Tolgoi (OT) concerns. The Anglo-Australian mining company Rio Tinto has invested USD 5.3 billion for the underground development of the Oyu Tolgoi project with a plan to produce 550,000 tons of copper per year. However, the project has begun to face some technical difficulties and may not be sustainable until 2022.

The green energy revolution is booming and demand for industrial metals is growing these days. OT is one of Rio Tinto's most important projects as the future trend of copper will continue to grow.

Rio Tinto still moderates the Oyu Tolgoi project, but it does not directly own shares of the deposit. 66  percent of OT's deposit is owned by Canadian mining company Turquoise Hill Resources (TRQ), which is listed on the Toronto Stock Exchange. The remaining 34 percent is owned by the Government of Mongolia. Rio Tinto owns 50.8 percent of the TQR.

At Tuesday’s annual shareholder meeting, SailingStone Capital Partners is planning against the re-election of Turquoise Hill’s four independent directors, which it said have been handpicked by Rio and are not acting in the interest of all shareholders.

“After five years of engagement, we simply do not believe that they are acting in our best interests, and therefore no longer deserve our support,” said SailingStone, which owns a 10.9 percent stake in Turquoise Hill. It wants minority shareholders to have a direct say in the appointment of one independent director to the board. SailingStone said the primary headwind for Turquoise Hill’s poor stock performance has been corporate governance.

The fund also said that attempts to portray the delays at Oyu Tolgoi as being related to “ground conditions” are only part of the story, and Rio’s management of the project has also been a “critical factor”.

“These are not geotechnical issues — these are project management shortcomings,” said SailingStone, citing a statement issued in February by Turquoise Hill that blamed delays sinking a key shaft on “structural, mechanical, piping and electrical installation productivity”.

Rio is overseeing construction of a underground project aimed to lift 550,000 tons annually

Rio Tinto declined to comment but has said it will provide an update on the project in August alongside its interim results. Turquoise Hill said it had enhanced its corporate governance practices in light of feedback from shareholders. It pointed to the appointment of a new chief executive in 2018 who is a direct employee of the company and reports exclusively to the board.

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Iron ore price rises to USD 68.4 per ton

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In the first three months, Mongolia’s industrial sector produced 895,700 tons of iron ore, 668,400 tons of iron ore concentrate, and 19,900 tons of zinc concentrate respectively. According to the current statistics, iron ore decreased by 348.300 tons or 28 percent, iron ore concentrate by 86.300 tons or 11.4 percent, fluorspar ore by 500,000 tons or 2.0 percent, and zinc concentrate by 4.0 thousand tons or 16.8 percent.In the first three months of 2020, iron ore exports reached 2.1 million tons or USD 141.1 million. Compared to the same period of the previous year, it decreased by 9,900 tons or 0.5 percent in volume and increased by USD 34.5 million or 32.4 percent in the monetary terms. The average price of iron ore was USD 51.4 per ton in the first three months of 2019, reached USD 68.4 in the same period of 2020, increasing by USD 17.0 or 33.1 percent compared to the earlier year. Iron ore prices on the world market are also rising amid reports that the Chinese economy is recovering. Currently, the Dalian Commodity Exchange (DCE) has risen iron ore price by 0.6 percent to 710 yuan per ton, while the Singapore Stock Exchange has risen 0.8 percent to USD 92.5. Since the beginning of the year, Mongolia had exported coal worth USD 513 million or 6.3 million tons, which decreased by 2.4 times compared to the same period of the previous year. The country has exported 671,000 barrels of oil, showing a fourfold decrease. Fluorspar export increased slightly by 15,000 tons, to 237,000 tons.

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Trade deficit of petroleum totals USD 248 million as of May

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Mongolia exported crude oil worth USD 24.8 million and imported USD 273 million of petroleum products in the first five months of 2020, which means the oil industry deficit reached USD 248 million. Fuel import contracted by 7 percent to 206,000 tons compared to the same period of the previous year. It plummetted by 20 percent to USD 101.8 million in price. Diesel fuel import decreased by 20 percent to 335,300 tons from a year ago, financially dwindled by 34 percent to USD 171 million. Domestic crude oil consumptions have been lowered predom-inantly due to the pandemic. Specifically, oil consumption has been deteriorated as a result of the suspension of export and obstacles in the mining industry, according to the fuel importers. Rosneft Oil Company decreased its border price of oil products supplied to Mongolia. On this subject, the retail price of AI-92 gasoline has been reduced by MNT 475 per liter, AI-80 by MNT 380, AI-95 by MNT 440, and diesel fuel by MNT 590 since March. PetroChina Daqing Tamsag LLC exports oil through the Bayankhoshuu border checkpoint, while Donshin Oil LLC exports by railway. Railway export has not been disrupted in the last few months. However, exports from the Bayankhoshuu border resumed after a period of disruption. Currently, there is no hindrance to exports, said the Mineral Resources and Petroleum Authority of Mongolia (MRPAM).

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Mongolia's SMI shows upward tend in may

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  • This was mainly due to the rapid recovery in the Business Confidence Index last month

Mongolia’s Sales Managers’ Index (SMI) is moving upward to a positive trend in May, according to the World Economics. This was due to the rapid recovery in the Business Confidence Index last month. However, the index remains below 50 points. Other key indicators show a slight improvement in the Sales Growth Index, while the Jobs Index shows weak demand. Mongolia’s economy has been hit hard by the pandemic, which was triggered by a temporary stagnation in China’s economy. As China opens up its economy, and many factories become more able to produce at nearly full capacity, the economy of Mongolia is following suit and responding positively. There is some way to go before the trend lines indicate renewed growth, but all indexes suggest the economy is moving in a positive direction, highlighted the World Economics. Mongolia is ranked 81 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Mongolia deteriorated to 81 in 2019 from 74 in 2018.

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BoP deficit reaches USD 665.4 million

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The foreign direct investment totaled USD 491.4 million, decreased by more than 20 percent year on year. The Bank of Mongolia (BoM) emphasized that the Oyu Tolgoi project made up more than 90 percent of the foreign direct investment as of the first quarter of the year.

In the first four months of 2020, the balance of payments (BoP) showed a deficit of USD 665.4 million. The BoP deteriorated by USD 988 million compared to a surplus of USD 322.9 million in the same period last year. As the balance of payments deteriorates, the current account balance deficits USD 389.6 million. At the end of April last year, the current account surplus was USD 689.3 million. Major exports fell sharply due to border restrictions imposed to prevent COVID-19 during the period. Specifically, coal exports at the end of May shrunk 2.6 times than the previous year. In terms of inflows, foreign direct investment totaled USD 491.4 million, which decreased by more than 20 percent year on year. The Bank of Mongolia (BoM) emphasized that the Oyu Tolgoi project made up more than 90 percent of the foreign direct investment as of the first quarter of the year.