Rio Tinto reduces loan interest rates to Mongolia for expansion of Oyu Tolgoi Copper Mine

According to related news, Rio Tinto (ASX, LON, NYSE: RIO) is preparing to reduce the interest rate on loans to the Mongolian government to finance its share of the construction cost of the huge underground expansion of the Oyu Tolgoi copper and gold mine.

Rio Tinto and its holding company Turquoise Hill (Toronto Stock Exchange symbol: TRQ) said that in return, the company wanted to address several regulatory and budgetary issues and reach a long-term power agreement for Oyu Tolgoi.

Rio owns 50.8 per cent of Turquoise Hill, while Turquoise Hill owns 66 per cent of Oyu Tolgoi. The rest is held by the Mongolian government.

The move comes after a new stalemate between the two companies and the government earlier this month, after an independent report rejected Rio Tinto's explanation for the project's delays and cost overruns.

The final estimate for the development of the new mine, announced in December, 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 reason for the cost and schedule review, but an independent report released earlier this month showed that this is due to mismanagement of the miners.

Financial regulators in the UK and the US are also reviewing Rio Tinto's disclosures about delays.

Rio and Turquoise Hill Resources reached a stalemate in the first few months of this year over funding for the expansion of the mine and forced the chief executive of the Canadian miner to resign.

The two companies finally reached an agreement in April to resolve the remaining $2.3 billion needed for underground projects and replace the deal under a memorandum of understanding signed last September.

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 achieved by 2025 at the earliest. This will make it the largest new copper mine to be put into production in several years.