FMG, the frontier and emerging market specialist manager, has said that changes announced to the country’s mining industry through the second quarter of 2015 have teed up Mongolia for a recovery in foreign direct investment.
The changes announced apply to the Oyu Tolgoi (OT) mine, and an agreement put in place between the country’s government, Rio Tinto and Turquoise Hill.
The deal should spur the OT mine project, where Turquoise Hill is the developer, with a 66% stake. Foreign investors will take note of the deal and the development implications, FMG suggests, noting that a $5.4bn development phase is now in sight for the OT mine.
The country’s stock market could start a longer term upward trajectory as returns from the mine come on stream and foreign investment is encouraged.
According to FMG: “We anticipate that a second upward leg will begin with the announcement of an OT underground mine financing deal. It would be the largest of its kind in the mining industry and supported by over 15 institutions.”
Initial reaction to the deal announced in May saw the MSE Top 20 gain 15%, although this rally was pared back by the end of the quarter. FMG said that its own Mongolia fund did well over the short term from its exposure to Turquoise Hill.
The mine is one of the largest copper, gold and silver mines in the world, and went into production in early 2013.