Ivanhoe, Rio, Mongolia Govt. reach tentative agreement on Oyu Tolgoi copper/gold project

Vancouver’s Ivanhoe Mines and its JV partner Rio Tinto have announced that a tentative agreement has been reached with a working group of the Mongolian Government regarding the Oyu Tolgoi copper-gold project.

RENO, NV - 

Ivanhoe Mines shares reached a 10-year high Tuesday after John Macken, President and CEO, announced that the Vancouver junior and UK über-miner Rio Tinto reached agreement "in principle" with the Mongolian Government for the development of the massive Oyu Tolgoi copper-gold project.

Ivanhoe (TSX: IVN) and Rio Tinto have been negotiating with a special Mongolian Government working group over taxes and royalty rates, government equity ownership and other conditions for the project.

In 2006, the Mongolian Parliament enacted a hefty windfall profits tax. However, the government also made allowances for negotiation of the tax rate. The tax would have imposed heavy royalties if the metal was not refined in Mongolia.

The Mongolian Government is interested in building a smelting and refining industry in the country.

Meanwhile, Ivanhoe Executive Chairman Robert Friedland and Mongolian officials have said that the Mongolian Government or a state-owned mining company is interested in exercising an option of up to 34% ownership in the project.

In a news release, Ivanhoe said detailed information about the agreement "will be released when appropriate, subject to the approval of the draft agreement by the Mongolian Government's Cabinet." The 10-member working group will submit the draft investment agreement will be submitted to the Mongolian Government Ministers.

Oyu Tolgoi is located in the south Gobi region of Mongolia. Mine life is estimated at 40 years with an annual production of 1 billion pounds of copper and 330,000 ounces of gold.

Ivanhoe Mines share hit a high of Cdn$16.09 on the TSX Tuesday closing at $14.60.

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