Trade links between Canada and Mongolia could be strengthened as the two countries move closer to signing a foreign investment promotion and protection agreement (FIPA).
Canada's minister of international trade, David Emerson, met with the Mongolian government during a recent visit to the country, the first trip to be made to the Mongolia by a senior Canadian minister in a decade.
He met with the Mongolian minister of industry and trade Khalzkhuu Narankhu, president Nambaryn Enkhbayar, and prime minister Sanjaa Bayar to discuss ways of promoting bilateral commercial ties.
Commenting on the meeting, Emerson remarks: "Canadian companies are already significant investors in Mongolia and are keen to continue helping Mongolia develop its incredible potential.
"Our desire to put in place an investment agreement with Mongolia is a clear expression of Canada's commitment to building a strong long-term partnership between our countries."
Canada is the second largest investor in Mongolia, and bilateral trade with the country reached US$203mn in 2006, an increase of 18% from 2005.
Natural Resources Canada estimates that Canadian companies, led by over 20 mining and exploration firms, have around US$400mn in assets within Mongolia.
A FIPA is a bilateral agreement that aims to protect and promote foreign investment. Canada has a total of 23 FIPAs in force.
Improving Mongolia-Canada trade relations and the ultimate signing of a FIPA could also help the Canadian company Ivanhoe Mines support its current Oyu Tolgoi copper and gold project in Mongolia.
There has been some speculation over the project, in light of a draft agreement signed in April 2007 coming under review by the government again. A new cabinet was formed in December, and it was decided that the agreement needed to be revisited.
However, as yet there has been no evidence the review will make any radical changes to the previous agreement or delay the project, despite heightened speculation in recent weeks.
Management at Ivanhoe Mines has issued a statement revealing that in December they received a letter from the new Mongolian prime minister Sanjaa Bayar containing assurances that he fully supported foreign investment and wanted to see the construction of the Oyu Tolgoi project commence before the Mongolian general elections in June.
Ivanhoe's strategic partner in the mining project is Rio Tinto, and in October 2007 it signed an interim convertible line of credit for up to US$350mn with the company.
Ivanhoe Mines is planning to draw down an initial amount of US$150mn to support the project development. This credit facility matures in September 2010, and carries a margin of 3.3% plus Libor per year.
Last Updated January 11, 2008
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