2 Oct, 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 a meeting will be convened next week to whittle away at the remaining issues.
Rio Tinto Ltd, the project operator and major shareholder, and the Mongolian government held an Oyu Tolgoi LLC 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 ($5.5 billion) expansion project.
The board agreed among other things that all Oyu Tolgoi licenses owned by third parties should be transferred to Oyu Tolgoi LLC such that the Mongolian government will own a 34 per cent stake over the entire licensed Oyu Tolgoi deposit area.
This means that two licenses part-owned by Canada-listed mining company Entree Gold Ltd will be transferred to Oyu Tolgoi LLC.
As part of the transfer, the Mongolian government will receive an additional $US1.4 billion over the duration of the project, the government said in a statement.
Rio Tinto declined to comment on the matter.
The Oyu Tolgoi project is 66 per cent owned by Canada-based Turquoise Hill Resources Ltd, which in turn is majority owned by Rio Tinto.
The Mongolian government owns the remaining 34% stake in the mine.
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.
Rio Tinto recently postponed the underground mine expansion and announced plans to lay off as many as 1,700 workers after the government announced that any provisional financing for the project would have to be first 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 conduct an in-depth review of additional project financing.
At full output, Oyu Tolgoi is set to produce an average of 450,000 metric tons of copper and 330,000 ounces of gold a year, as well as silver and molybdenum, a metal used to strengthen steel.
The International Monetary Fund has estimated the mine will generate up to one-third of Mongolia’s gross domestic product when it reaches full production, expected in 2021.