Jakob Stausholm, Rio Tinto's chief executive, met with Mongolian Prime Minister Luvsannamsrain Oyun-Erdene, this week to address issues that still threaten the future of the company's vast Oyu Tolgoi copper and gold mine.
The continued expansion of the project in the Gobi Desert has been plagued by delays and cost overruns, which sparked outrage by the Mongolian government that threatened to rescind the 2009 investment agreement, which is the basis of mine development.
Relations between Rio Tinto and the Central Asian country reached a freezing point in August, when an independent review rejected the mining giant's explanation for the project's delays and rising costs.
Mongolia's position is that Rio should bear cost overruns and completely cancel Ulaanbaatar's 34 per cent debt in the project, Monsam, the Mongolian news agency, reported.
It is understood that L. Oyun-Erdene also wants Rio Tinto and its majority-owned Turquoise Hill Resources to re-examine the economic benefits that expansion will bring to the treasury.
Rio Tinto is preparing to make concessions to the Mongolian government to complete the troubled project, including lowering interest rates on loans to Mongolia to finance its share of construction costs, according to people familiar with the matter.
Rio Tinto may also consider a "restructuring" of Oyu Tolgoi's ownership order, according to sources.
2020 to 2022 to 2023
The final estimate for the development of the new mine announced in December 2020 puts the cost of the underground portion of Oyu Tolgoi at $6.75 billion, about $1.4 billion higher than the original estimate for 2015.
The first production, originally expected at the end of 2020, was rescheduled in October 2022, and Rio blamed adverse geological conditions on the main reasons for the cost and schedule review. An independent report released in August suggested that this was probably due to mismanagement of the miners.
Financial regulators in the UK and the US launched their own investigations into delays and cost inflation disclosed by Rio Tinto, which hit record highs two months later.
Copper and gold deposits are located in the southern Gobi area of Mongolia, about 550 kilometers south of the capital Ulaanbaatar.
On October 14, Rio Tinto took a 50.8 per cent stake in Canada's turquoise mountain resources company, which announced that it would need an additional $1.2 billion for expansion, and its share price plummeted. It also said that due to problems related to covid-19, the first commercial production would be no earlier than January 2023, about three months later than the previous target.
Oyu Tolgoi is Rio Tinto's main copper growth project. Once completed, the underground part of the mine will increase production from 125000-150000 tons in 2019 to 560000 tons at its peak, which is now expected to be as early as 2025.
By 2030, the business will be the fourth largest copper mine in the world, according to Rio Tinto.
The mine is the country's largest source of foreign direct investment, creating thousands of jobs and generating nearly $3 billion in tax revenue over the past decade.
