RIO TINTO PLAYS DOWN MONGOLIAN DELAY

Rio Tinto has played down concerns of a delay in the start of production at Oyu Tolgoi, one of the biggest copper mines in the world, following a stand-off with the Mongolian government.

The company, which spent $935m in July to maintain its 51 per cent stake in the project, confirmed on Tuesday that it also backed co-owners Turquoise Hill of Canada who on Monday rejected a request to renegotiate the terms of the Oyu Tolgoi investment agreement with Mongolia, which had been ratified as recently as October 2011.

Mongolia’s new ruling coalition has promised to amend a number of mining agreements previously signed by the landlocked country’s government.

Rio Tinto said on Tuesday that work on the $6bn project was 97 per cent complete and that negotiations to purchase power from China were progressing.

First copper ore is expected to be processed through the mine’s concentrator within six weeks of a final power deal being concluded.

Analysts described Rio Tinto as being “confident” the current agreement would hold.

The remarks came as part of third-quarter production report that Citigroup described as “broadly in line with our forecasts, critically for iron ore and copper”.

Tom Albanese, chief executive, said Rio Tinto had achieved record quarterly production at its flagship Pilbara iron ore operations in Western Australia, with production of copper, bauxite, alumina and titanium oxide all higher than the same period the previous year. But third-quarter production of coking coal, along with precious metals gold and silver, slipped back.

According to Mr Albanese: “Markets remain volatile, but our business is resilient”.

In a note on Tuesday, Deutsche Bank said: “The blemish on the result was a downgrade to calendar year copper production from 580,000 tonnes to 560,000 tonnes, but stronger iron ore sales offset this.”

Shares in Rio Tinto rose by 79.5p to £30.53 on Tuesday leaving them down 9 per cent over the year.

By Michael Kavanagh

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