Rio Tinto (ASX, LON, NYSE: RIO) CEO Jakob Stausholm met this week with Mongolia’s Prime Minister Luvsannamsrain Oyun-Erdene within the hope of ironing out points threatening the way forward for the corporate’s huge Oyu Tolgoi copper mine.
The growth of the venture within the Gobi desert has been suffering from delays and prices overruns, which have angered the Mongolian authorities to the purpose of threatening to revoke the 2009 investment agreement that underpins the venture.
Relations between Rio Tinto and the Central Asian nation hit a contemporary low in August, when an impartial overview rejected the corporate’s rationalization for the delays and price overruns.
Mongolia’s place is that Rio Tinto ought to cowl value overruns whereas money owed accrued on Ulaanbaatar’s share of the venture (34%) must be absolutely eliminated, stories Mongolian news agency Montsame.
It’s understood that L. Oyun-Erdene additionally needs Rio Tinto and Turquoise Hill Assets to revisit the financial advantages that the growth will carry to the state’s coffers.
Sources conversant in the matter informed the Northern Miner’s sister publication, MINING.COM, that each firms are ready to make concessions to the Mongolian authorities as a way to full the troubled venture. They embody decreasing rates of interest on loans to the nation to fund its share of the development prices.
Rio Tinto may think about a restructuring of Oyu Tolgoi’s possession construction, the sources mentioned.
From 2020 to 2022 to 2023
A definitive estimate for the event of the brand new mine degree, announced in December 2020, pegged the price of Oyu Tolgoi’s underground part at US$6.75 billion, about US$1.4 billion larger than its original estimate in 2015.
First manufacturing, initially anticipated in late 2020, was rescheduled for October 2022, and Rio Tinto blamed unfavorable geological situations as the principle trigger for the fee and timeline overview. The independent report published in August urged it was brought on by the miner’s mismanagement.
Monetary regulators in the U.K. and U.S. kicked off their very own probes into Rio Tinto’s disclosures in regards to the delays and swelling prices, which hit a brand new excessive two months later.
Shares in Canada’s Turquoise Hill Assets, by which Rio Tinto has a 50.8% stake, cratered on Oct. 14 after saying that the growth would require a further US$1.2 billion. It additionally mentioned that as a consequence of Covid-19 associated points, first industrial manufacturing could be no sooner than January 2023, round three months’ later than the earlier goal.
Oyu Tolgoi is Rio Tinto’s predominant copper development venture. As soon as accomplished, the mine’s underground part will carry manufacturing from 125,000–150,000 tonnes in 2019 to 560,000 tonnes at peak output, which is now anticipated by 2025 on the earliest.
By 2030, the operation could be the world’s fourth-largest copper mine, according to Rio Tinto.
The mine is the nation’s greatest supply of overseas direct funding, having created 1000’s of jobs and generated virtually US$3 billion of taxes and payment income over the previous decade.
