Mine shaft construction at Oyu Tolgoi, Mongolia, image by Ivanhoe Mines
The May 12, passing of Mongolia's windfall profit tax law on copper and gold rocked Mongolia's mining world. The law calls for a 68% tax on gold when the international price is above USD$500/oz and on copper on prices above $2,600 per ton. While Mongolia has always said that they are very supportive of foreign investment, companies viewed this as a real threat to a previously investment friendly atmosphere.
The law was passed on a Friday night and went relatively unseen in Mongolian media, however by Saturday afternoon reports in English were on mongolia.neweurasia.net and mongolia-web.com. For investors in the United States and Canada this was the first time they had heard about the new law and many companies stocks fell 20-30%. The lack of information sources in English on Mongolia have brought blogs to the forefront, especially on mining and the windfall profit tax.
The week following the passage of the law saw the Mongolian National Mining Association up in arms over the proposed law. The organisation's meeting was covered by Luke Distelhorst, author of mongolia.neweurasia.net . Both the mining companies and the members of the Mongolian Parliament who passed the law raised good points but still need to cross the gap that they have created in between each other.
The company that has been in the spotlight of protests and plastered across Mongolian papers is Canada's Ivanhoe Mines Ltd. Luke interviewed the President and CEO John Macken, as did Tom Terry of Eagle TV. Besides statements made by Ivanhoe and some other companies to the public, the majority of information came from blogs within Mongolia.
The actual law was passed in Parliament, while only 45 of 76 members were present, at a vote of 35-10. Most laws in Mongolia have three official discussions before they are brought to a vote, however this law was drafted and passed during the second discussion, all within five days. The haste and apparent lack of transparency brought criticism from mining companies as well as politicians and the President of Mongolia, who had a five day window to veto the law after
This issue brought international attention, most of which can be found on the comments of one post found here. Ivanhoe's press conference, which was also covered by mongolia-web, found here, sparked massive debates between Mongolians, foreigners and all those found between. So far there have been 87 comments from all over the world expressing almost every view possible.
Here again who is stealing whose wealth? OT [Oyu Tolgoi project] rightfully belongs to Mongolia. In the Mongolian Constitution, it says that – in Article 6 2. All land, except that in citizen's private ownership, as well as the subsoil with its mineral wealth, forests, water resources and wildlife shall be the property of the State. State is PEOPLE. People is Mongolian citizens.
A Canadian investor says:
I don't expect to take something for nothing – IVN will pay taxes, employ Mongolians, build infrastructure and Mongolia will prosper. But you can't just pick numbers out of thin air and call profits excess or say that a mineral discovery that would never have been found without foreign investment can just be expropriated when it turns out to be valuable.
On Friday May 26, it was first announced on television that the President would not veto the law. Mongolia.neweurasia.net was the first to announce it outside of Mongolia and served as the source for many mining companies and investors who were anxiously awaiting the President's decision.
This windfall profit tax law has garnered international attention and blogs (in english) have done more reporting than any other one news outlet. Even though big business economics is rarely covered in most blogs, the relevance of this issue has proven that blogs can take the spotlight when there is a lack of reporting from other sources. Interviewing CEOs (as well as political figures) CAN become the norm for blogs doing everyday reporting. In this case, even the Wall Street Journal contacted bloggers requesting information that may not have been publicly available in English.