MONGOLIAN PARLIAMENT TO VOTE ON SPECIAL LICENSE TRANSFER FROM ENTRÉE RESOURCES TO OYU TOLGOI

By A. Khaliun

In 2004, Turquoise Hill Resources and Entrée Resources Ltd entered into a Profit Sharing Agreement, preceding the signing of the Oyu Tolgoi Project Investment Agreement. Under this agreement, Turquoise Hill Resources was entitled to receive 70% of the profits if it invested $35 million or more in geological surveys and exploration at Entrée Resources' site and extracted resources from depths of up to 560 meters. For extractions deeper than 560 meters, its profit share would increase to 80%. In 2005, Turquoise Hill Resources transferred these profit rights to Oyu Tolgoi LLC.

In May 2022, Entrée Resources initiated arbitration proceedings, citing delays in formalizing its economic interests and the transfer of rights under the profit-sharing agreements. On December 19, 2024, the International Arbitration Court issued a decision confirming the validity of the 2004 agreement. The ruling allowed Oyu Tolgoi LLC to proceed with taking over Entrée Resources Ltd's special licenses and required the payment of associated taxes and fees.

To implement the decision, Oyu Tolgoi LLC's Board of Directors authorized its executive management to take the necessary actions in January of this year.

Following the signing of the Investment Agreement in 2009 for the development of the Oyu Tolgoi deposit, five exploration licenses were converted into exploitation licenses. Entrée Resources' sites with special licenses were subsequently incorporated into the planning of Oyu Tolgoi project activities. However, the dispute between the two companies has not been fully resolved. Implementation of the Arbitration Court's decision is still in progress, according to Kh. Amarjargal, Executive Director of Rio Tinto Mongolia.

Director Kh. Amarjargal commented on the matter, stating: "We are eager to complete the transfer of the special license as soon as possible, as ore extraction at the Entrée Resources-licensed section of the Oyu Tolgoi underground mine is scheduled to begin in early June 2025. Starting in 2028, output from this site will be processed at the enrichment plant. If the license is not transferred in time, we face significant financial risks. It could require a revision of the underground mine plan, which would demand substantial additional investment."

There are five licensed areas within the boundaries of the Oyu Tolgoi group of deposits. Three of these are owned by Oyu Tolgoi LLC, while the remaining two belong to Entrée Resources, a company fully owned by Canadian shareholders. 

At the Mongolian Government meeting on April 9, 2025, the boundaries of the strategically important Oyu Tolgoi group of deposits were established, inc officially including areas owned by Entrée Resources Ltd. It was reported that a proposal is being prepared for submission to Parliament regarding whether the state should acquire shares-up to 34% of the capital invested by Entrée Resources Ltd in that deposit free of charge, as provided by the Law on Minerals, or instead receive a royalty payment. This matter is currently being overseen by N. Uchral, Head of the Cabinet Secretariat and Minister of Mongolia.

At the April 16 meeting of the Parliamentary Standing Committee on Industrialization Policy, Minister of Industry and Mineral Resources Ts. Tuvaan provided updates on several key issues, including Mongolia's first major investment agreement with its third neighbor, the transfer of special licenses between Oyu Tolgoi LLC and Entrée Resources, and the government's acquisition of a stake in a strategic deposit.

The Investment Agreement between the Government of Mongolia and Ivanhoe Mines Mongolia Inc. LLC, Ivanhoe Mines Limited, and Rio Tinto International Holdings Limited specifies that Oyu Tolgoi LLC will carry out exploration, mining, and processing activities under licenses No. 6709A, 6708A, and 6710A.

Additionally, Article 3.3 of the agreement states that "The Investor has the right to conduct in accordance with relevant laws and regulations the operations of mining and processing from any mineral deposits within mining license".

Minister Ts. Tuvaan clearly stated that the exploration licenses No. 3148X and 3150X, owned by Entrée Resources along with their associated rights, will be transferred to the investor. The Government will then convert these exploration licenses into exploitation licenses before they expire.

Following the license transfer, the Government will initiate discussions on acquiring 34% ownership of the strategic deposits licensed to Entrée Resources, in accordance with the Law on the National Sovereign Wealth Fund. Entrée Resources has indicated its readiness to transfer its 34% stake to the Government.

The exploration licenses No. 3148X and 3150X, referenced in Article 15.7.8 of the Investment Agreement, were issued to Entrée Resources Ltd on April 3, 2001. These licenses were later converted into exploitation licenses No. MV-015226 and MV-015225, known as "Shivee Tolgoi" and "Javkhlant," respectively, by Decision No. 877 in 2009 from the Head of the former Geology and Mining Cadastre Division of the Mineral Resources Authority of Mongolia. These exploited areas are the most valuable parts of the Oyu Tolgoi Group of deposits, containing 24.0% of its copper, 42.0% of its gold, 29.0% of its silver, and 94.0% of its molybdenum reserves.

The Minister emphasized that "the tip of the North Hugo deposit part of the expanded licensed area of the Oyu Tolgoi group of deposits, and the most valuable section known as 'Shivee Tolgoi' is located within the licensed area of Entrée Resources Ltd. The Oyu Tolgoi underground mining tunnel currently stops at the edge of Entrée Resources Ltd's licensed area. Given that block caving will cause the ore bodies in both the Oyu Tolgoi and Entrée Resources areas to collapse together, the issue of transferring Entrée Resources' license to Oyu Tolgoi must be addressed. There has been an indication that Parliament will decide on the matter, as the site falls within the boundaries of a strategic deposit. This issue is expected to be discussed at a forthcoming joint session of Parliament."