How to Destroy Mongolian Mining
The Mongolian state imposed what it has termed a "windfall profits" tax on mining carried out in that country. As Morgan J. Poliquin explains, the law constitutes a 68% tax on profits from mineral sales when the copper and gold price are above US$1.18 a pound and US$500 per ounce respectively. This tax is so punitive that its imposition is tantamount to nationalization. FULL ARTICLE
Comments (13)
Your Mongolian Mining column called to mind the perception of Aristotle; "That where a state possessed omnipotent power over money, there was nothing to prevent it from praticing gross fraud upon its citizens." Need I remind anyone that this was 300 years before the birth of Jesus Christ.
Published: June 20, 2006 9:28 AM
Alex,
Does your fine point apply only to Mongolia?
Published: June 20, 2006 10:09 AM
What sort of guarantees are the Mongolians getting from Ivanhoe about ecological protection? Gold mining produces terrible amounts of cyanide and mercury tailings and Ivanhoe does not have a good record on responsibly taking care of that.
The suggestion that "there's no one there" as far as the location of the mineral deposits is disturbingly like Manifest Destiny. Remeber that concept? Since the natives in the USA weren't exploiting the resources of the New World in a useful capitalist manner, it was up to the European invaders to take up the slack.
I think since the resources are in Mongolia and Ivanhoe wants to extract them, the Mongols have every right to make any policy they wish.Of course Ivanhoe won't like anything except the lion's share of the deal.The 'benefits' for the Mongols of working in mines and support industry for Ivanhoe may not be worth the long term price of an ecological disaster of cyanide and mercury toxins in one of the least despoiled countries left in our much- trashed world.
Published: June 20, 2006 10:23 AM
What sort of guarantees are the Mongolians getting from Ivanhoe about ecological protection?
I'm sure if the Mongolian government asked for 'ecological' guarantees monitored by an outside agency, as well as the use of particular extraction techniques acceptable even to Greenpeace members, the mining company would take this on board and weigh it against the investment risk.
But you'll notice the Mongolian government haven't asked for anything like this. They just want the money.
Published: June 20, 2006 11:09 AM
And we can be pretty certain that the Mongolain government won't be using the tax revenues for purposes of ecological protection (unless some crony friends of the state happen to be in that particular line of work).
Published: June 20, 2006 2:00 PM
Alan,
You miss the point that Mongolia imposed the tax after the fact. There is no way that the company would've invested a penny if any deposit were found was going to be effectively nationalized.
Mongolia of course has the right to make any environmetal demands before investment takes place. Mongolia in effect is going back on a contract, and will have a much harder time getting future suckers to invest anywhere at all in any industry in their country in the future as a result.
I suppose in a few years we'll hear calls for aid to Mongolia....
Published: June 20, 2006 3:19 PM
Mongolia of course has the right to make any environmetal demands before investment takes place.
How do you figure? If "Mongolia" was a sentient being, and the mineral resources in question part of its body (or otherwise its property), that would be true, but the "Mongolia" you speak of is just some gang of crooks that illegitimately claim some sort of super-ownership of everything inside a completely arbitrary line on a map. They have no right to demand anything at all.
Published: June 20, 2006 7:19 PM
Ok, Peter, you tell me then, does anyone in Mongolia then have any rights? Enforced by whom?
If Mongolia does not have the right to have quality environmental standards, then by what standard do mine investors have any rights at all?
Published: June 21, 2006 11:13 AM
'The suggestion that "there's no one there" as far as the location of the mineral deposits is disturbingly like Manifest Destiny. Remeber that concept? Since the natives in the USA weren't exploiting the resources of the New World in a useful capitalist manner, it was up to the European invaders to take up the slack.'
With that comment, you lumped independent homesteading in with "capitalist." FYI.
Published: June 21, 2006 11:24 AM
Very interesting article. Thanks Mr. Poliquin!
As to the discussion of ecological effects, I think you guys need to look at the big picture. Mongolia is a third world country. It isn't like that have clean drinking water already and suddenly the mining company is going to mess it up.
The relative risk of pathogens and other natural contaminants in the water is significant higher then the risk of a few ppb of cyanide, especially when reverse effects and threshold effects are taken into account. The infrastructure investment that a mining company would need to make would dramatically enhance the health and well being of the mongolian people well in excess of any possible or aledged "enviromental contamination".
Published: June 21, 2006 10:51 PM
Ok, Peter, you tell me then, does anyone in Mongolia then have any rights?
Of course people in Mongolia have rights. The exact same rights people in the US have. They don't have rights over the whole of the area called "Mongolia" any more than a US person has rights over the whole of the area called "United States". Each has rights to his own property, period. The government of Mongolia has no more legitimate right to make whatever demands of Ivanhoe before "allowing" them to invest there than you have to make demands of Bill Gates before "allowing" him to buy property in California or Chicago...or Baghdad, for that matter. Unless it's your property he's trying to buy, it's absolutely none of your business.
Published: June 22, 2006 1:01 AM
The Mongolian Gov't has a right to impose any tax it wishes on mining operations within its borders, especially now that copper, molybdenum and gold are selling for top prices. However, in the long run the rewards of having a booming economy with more jobs and opportunities DOES outweigh the risks of pollution, etc... If the environment is the true concern here, then contracts should be drawn by the gov't and Ivanhoe Mines in which Ivanhoe would clean up any environmental problems caused by its operations.
Published: June 23, 2006 2:32 PM
Some of you have rather deep misconceptions about Mongolia and about Ivanhoe Mines. I have been in Mongolia since 1995 on a regular basis from England and travelled widely in Mongolia.
1: There is no suggestion anywhere except in this thread that Ivanhoe intend to use mercury. If you have information to the contrary please post. FYI, mercury was banned in mining in the 1980s by the Supreme Soviet of the USSR and the Peoples Republic of Mongolia followed suit. Recently the Government closed over 150 illegal mercury processing operations by artisanal miners who were using Edge Mills. I have visited about 30 of them. There is no possibility in Mongolian legislation, or indeed in common sense, for Ivanhoe to use mercury for gold extraction. Indeed, mercury fails to recover fine gold smaller than about 60 microns and that is often the bulk of the gold. Therefore the waste tailings from the illegal miners' Edge Mills are then taken to cyanide leaching plants to recover the finer gold.
2: This thread is under some misunderstanding about ownership of land and minerals in Mongolia. The bulk of Mongolia is a single unfenced tract of Common Land, indeed the largest in the world, and the Government holds the land in trust - excluding urban areas - for the people under the Constitution. Every citizen
has the right to put his felt tent (ger = yurt) where he choses and to graze his flocks, the only exceptions being urban areas and special areas (eg military, forests, borders, ecological etc). Turning to minerals, all the minerals beneath the surface in the territory of Mongolia belong to the people, held in trust by the Government. The Government issues mineral exploration licenses and mining licenses - except for the protected areas and border areas. Therefore as owner of all the minerals, the Government is in a strong position in negotiations.
Published: September 20, 2007 8:42 AM