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The Government of Mongolia is by far the biggest obstical to the distribution of wealth to the people of Mongolia and to the success of Mongolia as a country. Asa long as they keep playing the gullable people for votes with populist laws, Mongolia will have difficulties. I suspect that the current government is learning that their actions do not work very well. They could be using the leveraging from the OT agreement to develop their other large deposits (of which they have many) but this would mean honoring their agreement with Rio Tinto and TRQ. Showing the foreign miners that they can honor agreements would in the short and long run get the investment dollars moving back into Mongolia in a big way as well as get them better deals from the western miners. The foreign miners are quite simply in a position to offer more in jurisdictions where legal stability exists as they do not have to take the variability caused by lack of stability into account. The cash flow from the OT deposit that would go to the GOM coupled with the increased trust that the foreign companies would have in the GOM would give the GOM increased leverage in future mining developments going forward. The Foreign miners are also accountable to shareholders (the ultimate owners of the companies) which means that they can not invest large sums of money in unstable regions as share holders want stability and a return on their investment. Share holders also expect their companies to invest their money where the returns are higher (taking all factors including stability into consideration). This makes it difficult if not impossible for foreign miners to invest any money in Mongolia under the current proposed legislation. As far as Mongolia developing its mines on its own goes, past and resent history has shown that the capability is not there. Even with coal mining which is far simpler than mining copper or any other metal, it has not worked out very well for them. The OT deposit could have been in production as early as 2009 but due to the inability to reach a deal and the uncertainty around the GOM commitment to the deal once it was reached, this deposit will not be in production till mid 2013. As well, under the proposed legislation growth in production will be limited as Rio Tinto and any other miner will be limited as to the future capital they will be able to invest. Had the OT deposit gone into production in 2009, the GOM would have enjoyed huge leverage and many other deposits that are currently going no where like Tavan Tolgoi would by now be in production and earning the GOM and the Mongolian people huge returns. As such the GOM can continue in their current ways and keep getting the same results (not very good) or they can show the Foriegn miners that the are ready to do business and that they will honor their agreements and quickly see way better results.
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