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 project.
"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.