Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

So how hard is it to construct a giant copper mine in the middle of the Gobi Desert?

Standing in a ger near the Oyu Tolgoi copper-gold mine, a former president of Mongolia had an answer. "Oyu Tolgoi has had a very difficult time getting started, like an elephant giving birth," said former president N. Bagabandi. "It had to go through a lot of challenges to get to today's success."

Mr. Bagabandi made the remarks at a dinner party held in the traditional herder's tent, which was attended by Jan du Plessis, chairman of Rio Tinto. Rio owns an indirect 32-per-cent holding in the mine through its stake in Ivanhoe Mines Ltd. , owner of 66 per cent of Oyu Tolgoi.

Story continues below advertisement

At first blush, the dinner, hosted in the Big Ger entertainment complex built by Ivanhoe chairman Robert Friedland, appeared to be just another chance for the two sides to toast each other.

But behind the scenes, the elephant giving birth has been more challenging than anyone had anticipated. The day before, Mongolia's mining minister D. Zorigt had mailed a letter requesting discussions with Ivanhoe and Rio over the time frame under which the government could raise its stake in the mine from 34 per cent to 50 per cent.

The politics behind the mining minister's request are worth scrutinizing because they will set the tone for other developments in Mongolia's mining sector in the coming months.

Mongolia's general elections are set for next June. Mr. Zorigt and Prime Minister S. Batbold – who both oversaw the signing of the Oyu Tolgoi agreement in 2009 – belong to the majority party, the Mongolian People's Party, which is in a coalition government with a smaller but more powerful rival the Democratic Party.

Mr. Batbold and Mr. Zorigt have seen their political fortunes waning steadily this year, as support for them within their own party has eroded and other party members jockey for position. The MPP is particularly nervous ahead of next year because of the emergence of a powerful former prime minister, N. Enkhbayar, who has re-entered politics.

In a bizarre turn of events Mr. Enkhbayar has registered his new political party as the Mongolian People's Revolutionary Party, the old name for the majority Mongolian People's Party. The MPP is concerned the name confusion will cost them votes.

The erosion of support for Mr. Batbold and Mr. Zorigt is serious enough that sources in Ulan Bator believe Mr. Zorigt will not last until the end of the year in his current position. The attacks against him have been going all year – most recently in May when Parliament discussed a motion to dismiss him – and the Oyu Tolgoi agreement is always one of the arrows in the arsenal. The possibility that Mr. Batbold could get pushed out by his own party ahead of elections also can't be ruled out, although that's less likely.

Story continues below advertisement

So earlier this month, when 20 members of Parliament sent Mr. Batbold a letter asking him to reopen the investment agreement, the challenge was serious. Under Mongolian law, a minimum of 19 lawmakers out of the total 76 is required to bring a motion to the floor to dismiss the prime minister, so the signatures of 20 lawmakers was symbolically significant.

On the other side of the aisle, Democratic Party leader and Mongolian president Tsakhia Elbegdorj is increasingly powerful, and is regarded as an influential decision maker behind the development of the Tavan Tolgoi coking coal deposit, which is one of the largest in the world.

The irony of the Mongolian government's move on Oyu Tolgoi is that in Ulan Bator people close to government usually have only nice things to say about how important the mine is for Mongolia. Quietly, people close to and within government say there is little chance the investment agreement will get changed in any significant way. If Rio and Ivanhoe can succeed in keeping the political heat off, then the birth of the elephant that is Oyu Tolgoi could still proceed on track.

Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies