– This agreement will be a model for other mining companies –
Interviewed S.Erdenebat, Coordinator-Cooperation Agreement of Oyu Tolgoi LLC.
The Umnugobi region and Oyu Tolgoi LLC is about to enter into a cooperation agreement. Can you talk about this?
Mining company Oyu Tolgoi is working to enter into a cooperation agreement with the local government of Umnugobi region and Khanbogd soum (County). Agreements with local governments and residents is common in the Australian and Canadian mining sectors. The mine has been actively working on this agreement with the local government of the Umnugobi region since 2011. This innovative agreement will serve as an example for other mining companies. The cooperation agreement is a document that will regulate the long-term cooperation between the mine and local community. The agreement will outline areas of cooperation between local government and the Oyu Tolgoi project.
Why this agreement is necessary?
Oyu Tolgoi LLC is obliged to participate in local development, working in compliance with international standards. To fulfill this obligation we have initiated a cooperation agreement that outlines the future development of the region and will be the basis and conditions for long-term relations between the mine and local region. It will serve as valid legal document to be implemented fully and actively working with the regional and local county governments. The Investment Agreement signed by the Government of Mongolia and Ivanhoe Mines Mongolia Inc LLC, Ivanhoe Mines Limited, Rio Tinto International Holdings Limited company and Mongolian minerals law contains a clause about entering into a cooperation agreement with local government and this needs to be implemented. Rio Tinto recommends the mines it operates, enter into cooperation agreements with local communities and developed concrete proposals. This agreement is a key document to integrate local development priorities with the operational plan of the company. The agreement will clearly outline the obligations and responsibilities of each party. Oyu Tolgoi LLC currently implement many projects directed at local development and have planned many more projects and programmes which will contribute significantly to regional development. This agreement will legalise all these activities.
What is the benefit of the agreement?
This agreement will not only benefit the Umnugobi region, it will benefit both parties. The agreement will enable Oyu Tolgoi LLC to access the state services necessary for project operations, faster and within the legal framework. The agreement will help the construction team, production team, local residents and the wider community understand the project, enabling them to support and cooperate in the successful implementation of the project.
Are there other instances of mining companies entering into such long-term cooperation agreements with the local community before?
This is the first comprehensive agreement of this kind to be done in Mongolia. We have no doubt that this will serve as example and model agreement for other mining companies. We are learning and getting ideas from similar agreements signed in other countries. We organised workshops and training looking into similar international experiences. We also organised a study tour to Australia in November 2011. The group learned the best practices and experiences of community agreements in Australia.
What is the significance of this agreement?
It can be said that this agreement has multiple significances.
- The cooperation agreement implements the clauses of the Mongolian laws, the Investment agreement and decisions of local government.
- The agreement implements the international standards complied to by Rio Tinto, the investor.
- Long term mutual trust will be set up with local community. The business environment will be stabilized and business-risks will be lowered.
- The multi-sided relations of the company and local community will be streamlined.
- It will allow Oyu Tolgoi to fulfill its corporate responsibility and improve its opportunity to get support from the government, community and the investors.
The objective of the agreement is to make a tangible contribution to the local and regional development by increasing the economic benefit of the project to the region in partnership with Umnugobi Regional Development Council and local stakeholders.The cooperation agreement includes comprehensive management plans that must be implemented and developed based on mutual negotiation and participation of all stakeholders. Each management plan consists of approaches, implementation plans, goals, development principles, conflict solution, monitoring and improvement mechanisms.
What stage are you at with the signing of the cooperation agreement? What are the specifics?
The agreement signing process has three stages. Negotiation on the agreement started on February 2011. Firstly, the parties determined the 'Vision' of the soums (counties) of the Umnugobi region. Representatives from local government, state government, civic society and the community participated in this workshop. On 8 April 2011 the Memorandum of Understanding on the Cooperation Agreement was signed by the Umnugobi regional and Khanbogd county Governors and management of Oyu Tolgoi LLC. The mutual cooperation agreement to provide technical assistance to the working group of the region was signed on 7 November 2011. The second stage is the Progress Agreement, a draft of the Progress Agreement, is ready and the parties will sign it soon. The draft agreement was openly discussed by the public and the opinions and feedback of local residents, government and non-government organisations and businesses were included in the draft agreement. We are working to finalise the agreement this year. This is the first time an agreement like this has been done in Mongolia. We don’t have any experience with this type of agreement, and as the agreement will have many clauses and provisions, we need to conduct research before it is completed.
What clauses will be included in the Cooperation Agreement to be entered by Umnugobi region and Oyu Tolgoi LLC?
The following multi-sided clauses are included in the agreement – support local socio-economic development, increase positive socio-economic impact of mining operations, protection, rehabilitation of the natural environment, preservation of ecological balance, protection of historical & cultural heritage, support traditional animal herding, introduce appropriate water, pastureland management of Gobi area, vocational training of residents, support employment generation and job creation, develop urban planning, social services, IT, infrastructure, strengthen capacity of local government institutions. Overall, this agreement touches multiple issues of socio-economic development of the Umnugobi region and will make a tangible contribution to development.
Ts.Urtnasan: "Cooperation of mining village was very interesting".
We asked Ts.Urtnasan, deputy governor of the Umnugobi region and head of the regional working group on the Cooperation agreement about the results of the study-tour.
What were the results of the study tour? What experience and ideas did you gain from the study tour?
Last year, groups from both parties working on the agreement organised a study tour to visit the mines of Rio Tinto in Australia. The study tour was instrumental for us to witness other communities outcomes of some of our undecided issues. In these communities mining workers live in nearby towns where the mine management had entered into cooperation agreements with the residents and they harmoniously co-exist. This was very interesting for us. Much progress has been made in the livelihood of the local residents. The mine offers development opportunities to their agricultural businesses. This was an example we can use our community.
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