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Rio Tinto says it is ready to cut interest rates on loans to the Mongolian government given to finance its share of the construction costs of an underground expansion at the vast Oyu Tolgoi copper-gold mine in the Gobi Desert. In return, the company wants several regulatory and budgetary issues resolved and a long-term agreement for Oyu Tolgoi.
Turquoise Hill, in which Rio has a 50.8% stake, owns 66% of Oyu Tolgoi. The rest is held by the Mongolian government.
The move comes after relations between the companies and the government ran into a new impasse earlier this month, following an independent report that rejected Rio’s explanation for project delays and cost overruns.
A final estimate for the development of the new level of the mine, announced in December, put the cost of Oyu Tolgoi’s underground section at $6.75 billion, about $1.4 billion more than the original 2015 estimate.
First production, originally scheduled for late 2020, was rescheduled for October 2022, and Rio blamed unfavourable geological conditions as the main cause of the revised cost and schedule, but the independent report released earlier this month suggested it was rather caused by miner mismanagement.
Rio and Turquoise Hill Resources spent the first few months of the year in a standoff over funding to expand the mine. The dispute forced the Canadian miner’s CEO to quit, not before taking Rio to arbitration.
The companies finally reached an agreement in April, which addressed the remaining $2.3 billion needed for the underground project and replaces agreements set out under a memorandum of understanding signed in September last year.
Oyu Tolgoi is Rio Tinto’s main copper growth project. Once completed, the underground section of the mine will raise production from 125,000-150,000 tonnes in 2019 to 560,000 tonnes at peak production, which is now planned for 2025 at the earliest. This would make it the largest new copper mine to come on stream in several years.
