SINGAPORE The Mongolian
government and global miner Rio Tinto Plc have agreed to
continue funding the $6.6-billion Oyu Tolgoi copper-gold
project in the South Gobi region to keep the mine on track to
achieve production by the end of June.
"All parties have agreed to
continue discussions during March with a goal of resolving the
issues in the near term," said Turquoise Hill Resources Ltd.,
majority-owned and controlled by London-based Rio Tinto.
The Mongolian government, which
has a 34-percent stake in Oyu Tolgoi, previously asked Rio
Tinto to explain a spike in costs at the Oyu Tolgoi
"Turquoise Hill and Rio Tinto
continue to have productive discussions with the government of
Mongolia on a range of issues related to the implementation of
the investment agreement, including project development and
costs, operating budget, project financing, management fees and
governance," the company said.
The Oyu Tolgoi board, which
includes representatives from Rio Tinto, Turquoise Hill
Resources and the Mongolian government, has approved continued
funding for the project.
"Oyu Tolgoi is expected to reach
commercial production by the end of June, subject to the
resolution of issues being discussed with the government," said
Turquoise Hill, , which owns 66 percent of the project.
"Given Oyu Tolgois
significant economic and social benefits to Mongolia, it is in
the best interest of all stakeholders to swiftly resolve these
important issues and keep the project on schedule," Turquoise
Hill Resources chief executive officer Kay Priestly said. "We
are open and willing to consider opportunities related to the
implementation of the investment agreement and companion
shareholders agreement that will assist the government as
long as it preserves the respective agreements."
The Mongolian government
temporarily suspended two mining permits for Entrée Gold
Inc., a Canadian copper-gold explorer partly owned by Rio Tinto
and Turquoise Hill Resources, which has been prospecting land
around Oyu Tolgoi (
amm.com, Feb. 28).
Oyu Tolgoi is a crucial project
for Mongolia as it is expected to account for 35 percent of the
countrys gross domestic product in 2020, when it is
scheduled to be fully operational.
There have been two separate
parliamentary petitions in the past two years to increase the
Mongolian states stake in Oyu Tolgoi from its current
level. Investors and stakeholders have warned that if a
proposed overhaul of the countrys minerals law goes
ahead, Mongolia will lose future mining projects akin to the
giant Oyu Tolgoi copper-gold mine.
The Oyu Tolgoi project is
expected to produce 425,000 tonnes of copper and 460,000 ounces
of gold annually when it reaches full capacity.
Rio Tinto is facing the
Mongolian challenges at a time when it is looking to cut costs
by $5 billion and has recently hired a new chief executive
officer and chief financial officer (
amm.com, Feb. 28).
A version of this article was first published by AMM sister
publication Metal Bulletin.