Rio calls it "the world's best untapped copper reserve" and its been hailed as a "cornerstone for Mongolia's future growth". But an alliance of non-government organisations in Mongolia say the deal breaches the constitution, international law and damages the country's national interests.
Presenter: Stephanie March
Jackson Cox, World Growth Mongolia; Sukhgerel Dugersuren, Mongolia's Centre for Citizens Alliance
MARCH: It took five years for the Mongolian government to approve the multi-billion dollar deal between Rio Tinto and Ivanhoe Mines Mongolia to develop the Oyu Tolgoi mine in the Gobi region. Jackson Cox is from World Growth Mongolia an international NGO that monitors trade, globalisation and sustainable development. He says the approval is a step towards a new era of prosperity and opportunity for the country.
COX: The investment amount is huge. It is a sum that no project has ever been approved of this size before and in Mongolia, the jobs that will be created from it and the spill over effect in to other sectors of the economy are going to give wholly-owned Mongolian enterprises a chance to really prosper.
MARCH: The lengthy delay was largely caused by the government's desire to make sure the deal was more favourable for the country than previous mining deals. It toyed with different tax regimes and ownership regulations, that were met with resistance from investors. Realising the structure of the Oyu Tolgoi license would set a precedent for all future large-scale mining investment the government took its time, while investors sat on the sidelines waiting for the outcome of the Rio-Ivanhoe venture. Jackson Cox says the approval of the deal has paved the way for a mining investment boom.
COX: The Oyu Tolgoi project is again gigantic, the others in the pipeline are also quite significant, together they will more than double Mongolia's GDP each year for next 30 to 50 years.
MARCH: But now civil society groups say the deal has breached the law and damages the country's national interests. Sukhgerel Dugersuren is from the Centre fro Citizen's Alliance in Ulaan Bator. She says the mining license and investment agreement were approved before a feasibility study was accepted by government, as required by law.
SUKHGEREL: There is a lot of allegations naturally not investigated by government that the members of parliament had received $20,000 accounts, there has been study tours.
MARCH: Ms Sukhgerel also says the government has failed to address serious environmental concerns.
SUKHGEREL: One key issues is the water issue. You know Oyu Tolgoi is in south Gobi region - it's a very sensitive fragile desert ecosystem. There is only underground water sources available and this mining is one of the largest mines in world, and does not have demonstrated existence of water resources necessary for the proposed capacity.
MARCH: She says approval will have a long term negative affect on the country's mining sector.
SUKHGEREL: There is demonstrated rule-bending that will have a negative impact on further decisions. There is a list of strategic mine, mineral deposits, including uranium deposits, which are already in the pipe waiting for negotiations and there is expectations that they will receive same treatment and conditions as this agreement and that there will be rule-bending to fit their specific needs.