Rio Tinto CEO: Concerned by Mongolia Comments on Oyu Tolgoi
Rio Tinto PLC's (RIO) new chief executive said Thursday he was concerned by comments made by Mongolia's government on the agreement that underpins the massive Oyu Tolgoi copper and gold development in the Asian country, where politicians are under pressure to raise more money from mineral wealth there ahead of May's presidential election.
A Mongolian government official familiar with the project this month said the government doesn't support the Oyu Tolgoi Phase Two project-finance effort initiated by Rio Tinto.
President Tsakhia Elbegdorj said this month that Mongolia should have more control of the mine once it is in full production, according to local media.
The company has previously said it was seeking about $4 billion to finance the mine's phase two underground works following the completion of its first phase. It may seek to raise as much as $6 billion, people familiar with the matter said.
Mongolian government officials have complained that Rio hasn't been transparent about the operation and has structured the mine's capital in a way that benefits the miner at the expense of the government, a complaint that Rio has rebutted and which it is seeking to resolve in dialogue with the government.
The complaints dovetail with the government's proposal to revamp its mining code, which formed the basis of a 2009 agreement that underpinned Rio Tinto's investment in Oyu Tolgoi.
"It puts at risk future investment, not only by Rio Tinto but also by others considering investing in Mongolia," said Mr. Walsh in reference to concerns that the government may seek to change Oyu Tolgoi's investment agreement, which set a benchmark for developing other mining projects in Mongolia.
Under the agreement, the Mongolian government holds a 34% stake in the mine with the remainder owned by Turquoise Hill Resources Ltd. (TRQ) a Canada-listed company that is majority-owned by Rio Tinto. The agreement sets terms on royalties and taxation as well stake ownership in the future.
Rio Tinto has said it continues to expect the first commercial production from Oyu Tolgoi by the end of June. In its full-year results statement, it said discussions with the government of Mongolia regarding the continuing implementation of their investment agreement were continuing.
It said the operation has entered into sales contracts for 75% of concentrate production from the project on international terms, and has also committed in principle to sell up to 25% of concentrate output to smelters in inner Mongolia for the first 10 years, subject to the conclusion of detailed sales contracts.
The mine's first phase cost more than $6 billion and took nearly three years of digging. It is an open-pit surface mine that began producing copper in recent weeks. Oyu Tolgoi over its life is expected to produce an average of 425,000 metric tons of copper and 460,000 troy ounces of gold a year.
Write to Robb M. Stewart at robb.stewart@dowjones.com and Alex MacDonal at alex.macdonald@dowjones.com
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A Mongolian government official familiar with the project this month said the government doesn't support the Oyu Tolgoi Phase Two project-finance effort initiated by Rio Tinto.
President Tsakhia Elbegdorj said this month that Mongolia should have more control of the mine once it is in full production, according to local media.
The company has previously said it was seeking about $4 billion to finance the mine's phase two underground works following the completion of its first phase. It may seek to raise as much as $6 billion, people familiar with the matter said.
Mongolian government officials have complained that Rio hasn't been transparent about the operation and has structured the mine's capital in a way that benefits the miner at the expense of the government, a complaint that Rio has rebutted and which it is seeking to resolve in dialogue with the government.
The complaints dovetail with the government's proposal to revamp its mining code, which formed the basis of a 2009 agreement that underpinned Rio Tinto's investment in Oyu Tolgoi.
"It puts at risk future investment, not only by Rio Tinto but also by others considering investing in Mongolia," said Mr. Walsh in reference to concerns that the government may seek to change Oyu Tolgoi's investment agreement, which set a benchmark for developing other mining projects in Mongolia.
Under the agreement, the Mongolian government holds a 34% stake in the mine with the remainder owned by Turquoise Hill Resources Ltd. (TRQ) a Canada-listed company that is majority-owned by Rio Tinto. The agreement sets terms on royalties and taxation as well stake ownership in the future.
Rio Tinto has said it continues to expect the first commercial production from Oyu Tolgoi by the end of June. In its full-year results statement, it said discussions with the government of Mongolia regarding the continuing implementation of their investment agreement were continuing.
It said the operation has entered into sales contracts for 75% of concentrate production from the project on international terms, and has also committed in principle to sell up to 25% of concentrate output to smelters in inner Mongolia for the first 10 years, subject to the conclusion of detailed sales contracts.
The mine's first phase cost more than $6 billion and took nearly three years of digging. It is an open-pit surface mine that began producing copper in recent weeks. Oyu Tolgoi over its life is expected to produce an average of 425,000 metric tons of copper and 460,000 troy ounces of gold a year.
Write to Robb M. Stewart at robb.stewart@dowjones.com and Alex MacDonal at alex.macdonald@dowjones.com
(MORE TO FOLLOW) Dow Jones Newswires
Copyright © 2013 Dow Jones Newswires
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