AKIPRESS.COM - The expansion of Rio Tinto’s Gobi Desert copper mine will “not be stopped” but the Mongolian government will seek to “improve” the terms of the investment agreement behind the delayed project, the Financial Times reports.
Dolgorsuren Sumiyabazar, the country’s minister of mining and heavy industry, told a conference in London on Tuesday that there were no plans to scrap the scheme at the Oyu Tolgoi mine.
However, Ulaanbaatar would seek to improve the terms of the 2015 deal that allowed Rio to push ahead with the underground mine.
Once complete this will make Oyu Tolgoi one of the world’s biggest copper facilities, producing more than 500,000 tonnes of the metal a year.
“There will be no changes to the base agreements, however in regards to the investment agreement . . . the implementation should be improved,” Mr Sumiyabazar said on the sidelines of the conference.
He said the government would seek to lower the interest rates on loans it has used to fund its share of the development costs, resolve tax issues and ensure that Rio builds a power plant to provide electricity for the complex.
His comments come after Mongolia’s parliament last week passed a resolution calling on the government to seek a greater share of Oyu Tolgoi’s mineral wealth.
They are likely to be welcomed by Rio, which feared Ulaanbaatar might try to renegotiate the agreements completely, leading to further delays.
In July, Rio said problems with the mine’s design would see the project’s cost rise to $6.5bn-$7.2bn, an increase of $1.2bn-$1.9bn on its original estimate. First production will be delayed by between 16 and 30 months, the company said, to between May 2022 and June 2023.
The Anglo-Australian miner has said it is prepared to explore “win-win partnership solutions”, including lower funding costs.
Mongolia owns 34 per cent of the mine, the rest is held by Rio Tinto-controlled Turquoise Hill Resources.
The country funds its share of the development costs via loans provided by Rio and its lenders. Mongolia plans to repay the debt by deferring dividends.
The structure is controversial because it means that Mongolia will have to wait decades before receiving its first payment.
The government signed two deals with Rio: a shareholder agreement in 2009 that paved the way for an open pit mine at Oyu Tolgoi and a second deal six years later covering the underground expansion.
A working group has been examining both deals for almost two years, leading to last week’s parliamentary move.
Under the resolution, the government can examine whether to swap its stake in the project for higher royalty payments. However, Mr Sumiyabazar said such a complex deal would need to be approved by all of Oyu Tolgoi’s shareholders.