Today, we have seen two opposing news in local and international media. The local media news.mn stated that Rio Tinto has been approved of USD4 billion from IFC, US EXIM, EDC and others. However, international media is stating that TRQ is issuing rights-issue offerings to pay off the bridge financing debt to Rio Tinto after it failed to secure project financing due to reasons – being in dispute with the government.
International media – sourced by Rio Tinto, blames the Mongolian government – the whole debacle is about Mongolian demanding greater shares in the mine. Because of that, project financing could not be secured and also, because of that Mongolia is not approving it. However, the reality is different. The working groups that has been established to resolve the cost overrun and approving updated feasibility studies have worked to overcome the misunderstandings and proceed with the project. However, OT LLC, managed by Rio Tinto Alcan, couldn’t justify the cost overrun and could not or did not update the feasibility study within time required by the Mongolian laws and regulations written in black on white.
It is true that Mongolia wanted to re-negotiate the terms in Investment Agreement after realizing the monstrous costs it has to pay for their 34% share. Because of its inexperience it attempted to amend the agreement, however it has been facing rejection from Rio Tinto. Then, the government backed off, and demanded justifications which Rio Tinto failed to provide. Without justifying the current spending, it seemed irrational to add more debt to the project, after all Mongolia is a shareholder. However, now it will got all the blames, even though it didn’t manage the project, it couldn’t monitor the cost overrun, and it can’t access to certain information and data of OT LLC as a shareholder.
It has been long time since Mongolia stopped talking about their desire of having bigger slice of the project. However, the cost overrun has to be justified and all the necessary information has to been given and has to be explained. Don’t rock the boat we’re all on.