http://www.theaustralian.com.au October 03, 2013
THE Mongolian government says half of the concerns about the development of Mongolia’s massive Oyu Tolgoi copper and gold mine have been resolved and that a meeting will be convened next week to whittle away the remaining issues.
Rio Tinto, the project operator and major shareholder, and the Mongolian government held an Oyu Tolgoi board meeting last week in London in which they resolved 15 out of the 30 urgent issues that had led to the suspension of the $US5.1 billion ($5.46bn) expansion project.
The board agreed, among other things, that all Oyu Tolgoi licences owned by third parties should be transferred to Oyu Tolgoi, giving the Mongolian government a 34 per cent stake in the licensed deposit area.
This means that two licences part-owned by Canada-listed mining company Entree Gold will be transferred to Oyu Tolgoi.
As part of the transfer, the Mongolian government will receive an additional $US1.4bn over the duration of the project, the government said.
Anglo Australian Rio Tinto declined to comment. The Oyu Tolgoi project is 66 per cent owned by Canada-based Turquoise Hill Resources, which in turn is majority owned by Rio Tinto. The Mongolian government owns the remaining 34 per cent stake.
The Mongolian government and Rio Tinto have been at loggerheads over the investment terms of an agreement signed by both parties in 2009.
The government has been pressing Rio Tinto to improve the terms of the deal, amid escalating costs. For its part, Rio Tinto wants to ensure that the government keeps to the original investment agreement.
Earlier this year, Rio Tinto postponed the underground mine expansion and announced plans to lay off as many as 1700 workers after the government said any provisional financing for the project would have to be approved by Mongolia’s parliament.
The board will meet again on Monday to address three key outstanding issues: how to monitor and reconcile project cost overruns, submit an authorised registration of the expansion project plan and review additional project financing.
At full output, Oyu Tolgoi is set to produce an average of 450,000 tonnes of copper and 330,000 ounces of gold a year, as well as silver and molybdenum.
The International Monetary Fund estimates the mine will generate up to one-third of Mongolia’s gross domestic product by 2021.
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