Government of Mongolia and Rio Tinto to continue funding for OT project
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Rio Tinto and Mongolian government have agreed to continue funding the $US6.6 billion required to launch the Oyu Tolgoi copper and gold mine in the South Gobi Region of Mongolia, while keeping it on track to begin the production in June as they try to resolve a dispute over costs.
“All parties have agreed to continue discussions during March 2013 with a goal of resolving the issues in the near term,” Turquoise Hill Resources, which is majority-owned and controlled by global miner Rio Tinto, said on Thursday February 28. The Mongolian government has a 34% stake in Oyu Tolgoi and Turquoise Hill has the rest. The Mongolian government earlier asked Rio Tinto to explain the spike in costs at the Oyu Tolgoi project.
“The Oyu Tolgoi LLC board has approved continued funding to progress the project,” Vancouver-based Turquoise Hill said in a statement.
A dispute between Rio and Mongolia escalated this year as President Tsakhia Elbegdorj called for more control of the project. According to the latest Bloomberg article, the talks with government is crucial for Oyu Tolgoi, in which Turquoise Hill holds 66 percent, as an interim two- month budget ended yesterday. Oyu Tolgoi’s annual budget for 2013 has not been approved yet by both parties, Mongolia’s mining ministry said in a statement recently posted on its website.
The conflict over Oyu Tolgoi involves cost overruns, financing, taxes and more locals in Oyu Tolgoi management. Mongolia temporarily froze Rio’s local bank accounts as part of a tax dispute, while the company has considered idling Oyu Tolgoi until all issues are solved, according some sources close to the matter.
Mongolia’s Mining minister Davaajav Gankhuyag said that the government plans to charge Oyu Tolgoi interest on unpaid tax. Mongolian officials have complained the miner hasn’t been transparent about the Oyu Tolgoi operation and has structured the project’s capital in a way that benefits the miner at the expense of the government, something the company disputes.
However, the company denies it has any taxes due.
Issues surrounding the OT project are taking attention not only from international media and global businesses, but also Mongolian public is eagerly watching the discussions being held by both parties, as it is one of the milestone projects in the nation’s economy.
Over its life, Oyu Tolgoi is expected to produce an average of 425,000 metric tons of copper and 460,000 ounces of gold a year.
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