As Mongolia related stocks down from 5-20% percent in recent days, Rio Tinto still plays a blame game with the Mongolian government. Instead of being open and transparent, Rio Tinto chose to be an aggressive bully. All of the major international media blames the government for delaying the project financing, thus, underground development.
The media portrays Mongolia as a land of resource nationalists demanding a greater share in the project. However, in the reality, it is not so. It is not a secret among the government officials that OT LLC always rushes and pushes their agenda in a strict time-frame. We have heard what they promised Mongolia to get the Investment Agreement signed. In 2009 they insisted that while the copper price is high, the mine should be developed as soon as possible. OT LLC have presented a feasibility study and it was the basis of the economics to exploit the deposit. Then after quarter billion USD was an increase for pulling the next year’s work. The initial feasibility study became a joke after a number of similar increases. Mongolian government demanded the amended or updated feasibility study to be approved by the Minerals Council in late 2011. Still, mining giant Rio Tinto and its consultants couldn’t manage to provide the government and the shareholder Erdenes OT with the updated version.
Everyone hoped that Rio Tinto has the experience and resources to develop the mine without pledging the license and other related assets. To this day, for over two and a half year after, the project financing is still on the desk asking USD4 billion from just less than a dozen commercial and development banks. Rio Tinto wants to become a lender too. The funny thing is that the loan period is 15 years. Meaning that even if the mine starts to generate enough profit to pay off the debt, it will not be able to do it. Still, it will be charged on completion guarantee by Rio Tinto, and interest by the development banks.
Technical Reports of the project indicated that the Open pit and Underground development will be around USD14 billion, however, we are going to witness USD10 billion increase in the coming years. It will be one of the most expensive mines built on the ground.
With the current situation Mongolia will be lucky to receive dividend from the project after 30 years. And, of course the tax is stabilized, cancellation of Netherlands double tax treaty will be in tact, according to the OT LLC spokesperson – mentioned in the Bloomberg news.
For a giant as Rio Tinto – blaming the government for everything through their channels is easy. ,Where is the other side’s opinion and statements? I wonder.