Is Rio Tinto leaving Mongolia?

Feb 26 • Mining, News, Politics • 13691 Views • 7 Comments on Is Rio Tinto leaving Mongolia?

1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

It has been almost a week since the iconic Oyu Tolgoi logo lights are out on Monnis Tower in central Ulaanbaatar where the main Oyu Tolgoi LLC and Rio Tinto Mongolia offices are located. Month of February, 2013 has been very turbulent for the world’s second biggest mining company. All the optimism Rio Tinto and Oyu Tolgoi LLC public relations teams were feeding international news agencies throughout last year seems to take a different turn after the Mongolian parliamentary session and open discussion on Oyu Tolgoi project this month.

Cost overruns, failure to update the feasibility study, Entree Gold profit-sharing arrangements, 2% royalty to Turquoise Hill Resources, lack of Mongolian shareholder involvement in the day-to-day activities, lack of transparency to the government were the main issues that triggered the fierce dispute.

Finding a common language with Mongolians has become difficult for Rio Tinto after their aggressive takeover of Turquoise Hill Resources and Oyu Tolgoi LLC.

Proposed over USD7 billion project financing was refused support by the government. Mongolia is not willing to support to project finance in the ground of solving the outstanding issues mentioned above. Moreover, Mongolian government is not interested in pledging the project license and involve costly loans while there are many unsettled issues.

Perhaps Rio Tinto should have chosen a different strategy approaching Mongolia that once has been a Great Empire and still managing to be an independent and democratic state with gigantic neighbors. The blame should be weighed mostly on Rio Tinto and Turquoise Hill Resources, because it has failed to adhere the laws and regulations, and to build trust-based relationship with their Mongolian partners.

The feasibility study update has been delayed 3 times previously and it is the 4th time. You cannot develop and operate a mine on the fly. Either the Oyu Tolgoi LLC management is ditching to disclose the document on purpose or the study team has been underestimating the scope of the project. Both of the cases are not acceptable by Mongolian laws and regulations.

We must not forget the positive effects the Oyu Tolgoi project is bringing to Mongolia internationally. Mongolia drew a lot attention from international investors and various sectors of the country is booming. However, we must not forget the trade-offs and think of the long-term economic diversification. It is in our best interest to welcome companies with good international reputation and best track record on social responsibility.

Meantime on last Monday, Standard and Poor warned that it is considering to lower the credit rating of Rio Tinto if it does not lower its’ debt. Surely, it will negatively reflect on project financing process for Oyu Tolgoi project that has been in negotiation with international financial institutions and commercial banks for over 2 years.

However, change in strategy, more transparency, efficient usage of resources, compliance with Mongolian laws and regulations could amend the relationship with the government. It is worth to note that Mongolia is not asking for higher stakes in project. It is all about compliance and improved partnership.

We all hope that Rio Tinto would not give up on company’s long-term plans. It is early to say if Rio Tinto is considering a withdrawal from the project and settling the matters by arbitration process. It will not do good for any of the sides. Tomorrow, on 27th of February, the shareholders’ meeting will resume in attempt to solve the issues.

Related Posts

7 Responses to Is Rio Tinto leaving Mongolia?

  1. H Lancaster says:

    This article is a joke.

    Rio Tinto has invested 6 billion dollars in your country — oh, by the way, congratulations on Chingis Khan, the greatest killer that has every lived — and your “laws” are thinly veiled attempts to get out of a deal that your government agreed to. Let me say that if Rio leaves, you won’t be able to mine OT. You will get nothing. Your suggestion that it is RIO’s fault is an absolute farce. But what can one expect from a Mongolian. Suspicion, lies, threats and general thuggery. You have learned from the Russians well.

  2. Amarsanaa says:

    Hi Lancaster, please respect contributor’s opinion and he we don’t have “you” and “us”, but it explains the situation and what is going on in Mongolia, instead of single sided news on foreign media. Tank you Valencia sharing your opinion.

  3. Alex says:

    Rio doubled planned debt to 2 billion by 40%. Its questionable thing for Mongolian government. Is it fair business? of course no. Lancaster

  4. Marpy says:

    Costs for most large mining projects have gone up a lot more than the cost increases at Oyu Tolgoi so why should the fact that costs went up be a big surprise for the GOM? If you look at the real numbers (those certified by accredited accounting firms), they did not go up by that much.

  5. Shuree says:

    Dear Valencia, thanks so much for the views of Mongolians and the government. The foreign news such as that of Bloomberg, Reuters have been very biased. I find yours very promising and encouraging. People outside MOngolia should read yours to balance their views. Thanks so much for your news and is it possible for you to send this to Financial Times and New York Times, and Wall Streeet etc to balance the views? Thanks so much again!

  6. ard says:

    99.9 % to People of Mongolia 0.01 % to Rio Tinto

  7. Ronald says:

    “Perhaps Rio Tinto should have chosen a different strategy approaching Mongolia that once has been a Great Empire and still managing to be an independent and democratic state with gigantic neighbors. The blame should be weighed mostly on Rio Tinto and Turquoise Hill Resources, because it has failed to adhere the laws and regulations, and to build trust-based relationship with their Mongolian partners.” – WHAT IS THAT?!
    Dear Valencia, i do believe that no matter of topic information what people provide in news has to be maximum objective first of all. Secondly, What are you talking about when you put in one sentence Rio Tinto and Great Empire?! And then “and still managing to be an independent and democratic state with gigantic neighbors”. That sounds very pro-Mongolian. And this very naive statement about democracy… Where did you live at the moment of writing that topic Valencia? Doesnt’ seem like in Mongolia bcs there is no democrasy and i have no idea when it is gonna be here with these closed mind politicians who are looking where to steal and don’t care about tomorrow. I write this bcs i know what i’m writing. And what about “gigantic neighbors”?! Mongolians hate Chinese people and nowadays hate Russians! Even though Russians made Mongolia free from China and has developed infrastructure of Ulaanbaatar many years ago, and how many people do live now in old Soviet buildings and how many before? And now Mongolia kicks Russians out from here. Now Mongolia loves USA. We can see that everywhere: cars, small shops, schools, basketball developement and so on. So, i don’t see any logyc in saying about “gigantic neighbors” in your topic. Plus you say a word “independent” but where is it?! All this beautiful country has been developed with help of outside. Foreign countries have developed Mongolia by huge flows of investment which is money and intellectual force. Mongolia wouldn’t be able to reach those hills on what it is staying now without foreign countries. Times of Chinggis Khan are in far past. Mongolian people need to realise that. Everything now has to be done by strong intention, runed by smart and long-term plans.
    “99.9 % to People of Mongolia 0.01 % to Rio Tinto” – thats very intellectual comment dear Mr. Ard 🙂

    I’m sorry that i may heart somebody by my comment but that’s what i and many people see, unfortunatelly.

Leave a Reply

Your email address will not be published. Required fields are marked *

« »