STUDY ON BASIC ISSUES RELATED WITH THE EMPLOYEES HOUSING PROGRAM 2008



This study was conducted according to the Consulting Agreement between Ivanhoe Mines Mongolia Inc LLC and Achid Consulting LLC.

In broad terms, the main purpose of the study was to explore the major issues related with the future housing program of Oyu Tolgoi project employees. Within this scope of study, Achid Consulting provided a comprehensive consulting service based on quantitative research methodology as well as extensive financial calculations on potential solutions to employee housing programs.

The study is sectioned into 2 major parts with specific focus on Mongolian housing environment where the first part aims to study the overall environment of the housing and construction sector. Within this scope, 8 aspects of this sector were studied and reported on:

  1. Mongolian Construction industry

  2. Housing demand

  3. 40000 housing unit program

  4. The program design

  5. The implementation state

  6. Mortgage market development in Mongolia

  7. Mongolian Mortgage Corporation

  8. Mortgage loan terms by bank

  9. Legal and Regulatory Framework

  10. Mongolian Experience in Employee Housing programs

The second part consists of 5 parts each designed to explore the different facets related to the Umno-Gobi province housing sector where primary research methodology such as questionnaire, survey and focus group workshops were utilized extensively. Based on the research outcome, a potential housing program was designed with its financial projections.

  1. Construction and financial market of Umno-Gobi province:

  2. Construction market in Umno-Gobi

  3. Current demand for housing in Umno-Gobi province

  4. Financial Institutions market and its availability in Umno-Gobi Province

  5. Housing cost estimates in Umno-gobi province

  6. Capacity of the market to provide Ivanhoe Mines (IM) desired service

  7. Minimum amount of financing required to provide IM desired service

  8. Period of time required to provide IM desired service

  9. Capacity of building companies to provide IM desired service

  10. Challenges and issues of construction business in Mongolia

  11. Field study report

  12. Compilation and summary of all the survey questionnaire, focus group discussions, and interview results

  13. Possibilities for land possession/use for foreign and foreign invested companies in Mongolia, the licensing process and related laws

  14. Possibilities for land possession/use for foreign and foreign invested companies in Mongolia

  15. Terms and conditions of land use by foreign invested companies

  16. Related laws on terms and conditions of land use by foreign invested companies

  17. About land management plans

  18. Structure and Authority of Government institutions responsible for land issues

  19. Related law clauses on land usage licensing process

  20. Land fees

  21. Time and costs set by law to acquire a land use license

  22. List of related laws and regulations

  23. Research based alternative to the implementation of the housing program

Results:

As the final stage of the project, the findings from the study were introduced to Rio Tinto (the then new management team of the Oyu Tolgoi project) with a two day long discussion.


From the study, Achid team has designed and introduced two alternatives to effectively solve Oyu Tolgoi employee’s housing issues. Such are:

To create financial infrastructure - a company specialized in mortgage loans in Umno-Gobi province and source the financing through investments from the Oyu Tolgoi project.


To link the housing program with financial services by contracting with financial institutions to provide low rate mortgage loans for the employees. This alternative was successfully adopted and solved the employee housing issues.