According to a recent report, Turquoise Hill said that the Mongolian government may cancel and replace the development and financial plans of the country's huge Oyu Tolgoi copper and gold mine. The company, controlled by Rio Tinto, said the Mongolian authorities were not satisfied with the plans of the top mining company. They are particularly concerned about the cost of the expansion, which was recently updated to $6.75 billion, $1.5 billion higher than the original estimate.
Turquoise Hill said Mongolia believed that the sharp rise in costs had eroded the expected economic benefits from the Oyu Tolgoi mine. The company's share price fell to its lowest level in a month after the news. Rio (Rio Tinto) (pointed out the stability risks associated with the original project design in 2019, implying up to $1.9 billion in additional costs and a 30-month delay.
The miner confirmed new cost estimates for underground expansion in December, adding that production would begin in October 2022. Erdenes Oyu Tolgoi LLC, a Mongolian company with 1/3 mines, responded to the new timetable and budget, saying Rio Tinto had failed to deliver on its 2015 commitments.
Erdenes's stake in Oyu Tolgoi is technically 34 per cent held through Oyu Tolgoi LLC, a Mongolian company. The rest belongs to Canada's Turquoise Hill Resources, which is 50.79 per cent owned by Rio Tinto.
"the Mongolian government has made it clear that if the Oyu Tolgoi project has no economic benefit to the country, it is necessary to review and assess whether the project can continue," Turquoise Hill said in a statement.
Ulaanbaatar also said that Oyu Tolgoi was expected to pay corporate income tax or profits tax only in the four years up to 2051, raising doubts about the economic benefits of the project. "it is estimated that the government will never receive) dividends from the (Oyu Tolgoi project and will assume $22 billion in debt, which will bring great difficulties to our future cooperation," it said in a letter quoted by Turquoise Hill.
The Vancouver-based mining company said it was committed to immediately reaching out to the Mongolian authorities and Rio Tinto to resolve the development plan and reconsider sharing the economic benefits of the Oyu Tolgoi project.
According to public data, among the proven minerals, Mongolia's Oyu Tolgoi project is one of the largest copper and gold deposits in the world, with copper reserves of 31.1 million tons, gold reserves of 1328 tons and silver reserves of 7600 tons. After the successful completion of the underground mining project, it is expected to contribute 20 per cent of Rio Tinto's revenue a year.
