After the OT project started production and commenced sales to the customers in China in June it faced a new challenge. This time, it wasn’t the Mongolian government. It was Chinese customs that demanded additional documents to release the copper concentrates that has been accumulated at the facility leased by a Chinese company at the border. The copper concentrate volume is estimated at 38,000 tons as of September.
OT LLC made a press release explaining the situation is connected with few documentation issues and it will be resolved soon taking 3 months from July to this day. The blockage came amid fierce dispute over the project financing for the underground development and expansion of the concentrator. Mongolia has been facing difficulties with falling coal price and other minerals. When one of the biggest state-owned coking coal producers Erdenes Tavan Tolgoi nearly went bankrupt due to mismanagement of the company, budget stumbled and the previous government was blamed for it. In addition to these difficulties, Chinese customs blocked the copper concentrate flow out of the country creating bigger loss for OT LLC which made it worse for the government.
IFC and other IFIs are set to provide project financing that is guaranteed by Rio Tinto will enable the project to expand and develop the underground mine. Mongolian government had opposed the project financing openly many times. However, Rio Tinto seems to have persuaded the government. At the ease comes on project financing, it coincides with the ease by Chinese customs.