Rio Tinto Group, the world’s second- largest mining company, said the start of its $6.6 billion Oyu Tolgoi copper mine in Mongolia is subject to the company resolving “substantive” issues with the government.
“A number of substantive issues have recently been raised by the government of Mongolia, including the implementation of the investment and shareholder agreements and project finance,” London-based Rio said today in a statement. “Subject to the resolution of these issues, first commercial production from Oyu Tolgoi is scheduled to commence by the end of June 2013.”
Rio, which today named Jean-Sebastien Jacques as the new head of its copper unit, twice rejected Mongolia’s demands in the past 18 months for a greater share of profits from the mine. President Tsakhia Elbegdorj said this month Mongolia should have more control of the copper-gold operation that will be the biggest contributor to its economy once it’s in full production.
“Jean-Sebastien has already been involved in the discussions in Mongolia and in fact he was there last week as part of the shareholder meeting and part of the discussions with the Mongolian government,” Rio Chief Executive Officer Sam Walsh said today on a conference call after reporting the company’s first annual loss.
Rio climbed 1.6 percent to 3,816.5 pence at 8:14 a.m. in London.
Rio and Mongolia, which held talks on Feb. 7 in the capital Ulan Bator, plan to resume discussions this month to resolve concerns that spending at Oyu Tolgoi is overshooting and the country isn’t benefiting enough from the development. The government is seeking to boost Mongolian participation in management and increase the number of local companies that can benefit from the project, including the use of a Mongolian bank.
Rio is considering a temporary halt to work to protest government demands for a greater share of profit, two people familiar with the plans said last month. The mine, the biggest copper project currently under construction, is 66 percent owned by Rio unit Turquoise Hill Resources Ltd. and 34 percent by Mongolia’s government.
Rio would continue to engage with the government to implement its 2009 investment and shareholder agreements “in their current form,” the company said in the statement.
The company reported a better-than-expected second-half loss as earnings at its iron ore unit beat analyst expectations and it lifted its dividend.
The loss was $8.9 billion in the six months ended Dec. 31, from a $1.76 billion loss a year ago, Rio said today in an e- mail. That’s better than the $10 billion median estimate of five analysts surveyed by Bloomberg. The loss, the biggest in at least 15 years, was driven by $14 billion in writedowns on the value of its aluminum and coal businesses and offset by an almost $1 billion benefit from its minerals sands operations.