Rio Tinto and Mongolia reach agreement to advance Oyu Tolgoi copper project
(RTTNews) – Rio Tinto Plc (RTNTF, RIO, RIO.L, RTPPF), Turquoise Hill Resources (TRQ) and the Government of Mongolia have reached an agreement that will lead to the start of underground operations at the Oyu copper mine Tolgoi, the British-Australian mining giant said in a statement. The deal will end a long-running dispute over the planned expansion of the Oyu Tolgoi copper-gold mining project.
Underground operations are expected to begin in the coming days, with first sustainable production expected in the first half of 2023.
Under the terms of the agreement, Turquoise Hill will waive a $2.4 billion carry account loan to the Mongolian government.
Rio Tinto and Turquoise Hill have amended memorandums of understanding signed in April 2021 to ensure they are funding Oyu Tolgoi appropriately. The capital forecast for the project is $6.925 billion, including $175 million of known COVID-19 impacts through the end of 2021. The remaining capital expenditure forecast is approximately $1.8 billion. dollars.
The two companies are also committed to improving cooperation with the public company Erdenes Oyu Tolgoi in monitoring underground development and improving environmental, social and governance issues.
The Oyu Tolgoi Mine is a combined surface and underground mining project in the sum of Khanbogd in the southern Gobi Desert, approximately 235 kilometers east of the provincial capital of Ömnögovi, Dalanzadgad. The site was discovered in 2001 and is being developed as a joint venture between Turquoise Hill Resources (a majority owned subsidiary of Rio Tinto) with 66% ownership and the Government of Mongolia with 34%. The mine started construction from 2010 and shipped its first batch of copper on July 9, 2013.
The rift between the Mongolian government and Rio Tinto came to a head in 2013, with the government urging Rio Tinto to settle the US$340 million tax issue and cost overruns of US$5.1 billion originally planned for 7.1 billion US dollars during the initial phase of the project.
In July 2013, shares of Turquoise Hill Resources fell 20% after a dispute between Tserenbat Sedvanchig, the executive director of Erdenes Oyu Tolgoi, and Rio Tinto. Sedvanchig was sacked in August and replaced by Davaadorj Ganbold, a former deputy minister and MP. Meanwhile, Rio Tinto has laid off 1,700 Mongolian mining workers.
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