Mongolia power deal raises a cheer for Rio
RIO Tinto's success in securing Chinese power for its $US6 billion ($5.8bn) Oyu Tolgoi copper mine in Mongolia has been applauded by analysts, providing some respite from concerning developments in the riskier places it operates.
The deal, announced late Monday, comes as an Australian lawyer working for a Mongolian Rio-controlled company remains stuck in the country, as talk continues in Mongolia that the nation wants a bigger stake in Oyu Tolgoi and as questions remain over the tenure of projects in the West African nation of Guinea, home of Rio's Simandou iron ore project.
Deutsche Bank analyst Paul Young said the Oyu Tolgoi deal cleared the way for first production from the mine in the Gobi Desert in the first half of next year. "The agreement brings resolution on a key issue, which has hindered the development of arguably the most significant copper discovery to be made in the past 20 years," Mr Young said.
The power deal, which was vital for early power to the concentrator at the site, was shaping as a major issue as China and Rio were unable to settle on terms.
But, as predicted by Rio executives, the agreement has been sealed in good time.
"This is a key positive for the project, with the power contract the only major critical-path item outstanding before the ramp-up can commence, laying to rest market concerns that failure to conclude negotiations quickly could delay the project," JPMorgan said in a note to clients.
Rio's two most prominent growth projects outside Australia are Oyu Tolgoi and Simandou, which are both in nations seen as having high sovereign risk.
Mongolia is reportedly looking at increasing taxes on Oyu Tolgoi, which is being developed by Rio subsidiary Turquoise Hill (the former Ivanhoe Mines).
In Guinea, where Rio has spent about $US2bn developing Simandou but is yet to officially approve it at board level, Brazilian giant Vale last month suspended development of its own Simandou project until the project's investment and ownership regime becomes clear.
The deal, announced late Monday, comes as an Australian lawyer working for a Mongolian Rio-controlled company remains stuck in the country, as talk continues in Mongolia that the nation wants a bigger stake in Oyu Tolgoi and as questions remain over the tenure of projects in the West African nation of Guinea, home of Rio's Simandou iron ore project.
Deutsche Bank analyst Paul Young said the Oyu Tolgoi deal cleared the way for first production from the mine in the Gobi Desert in the first half of next year. "The agreement brings resolution on a key issue, which has hindered the development of arguably the most significant copper discovery to be made in the past 20 years," Mr Young said.
The power deal, which was vital for early power to the concentrator at the site, was shaping as a major issue as China and Rio were unable to settle on terms.
But, as predicted by Rio executives, the agreement has been sealed in good time.
"This is a key positive for the project, with the power contract the only major critical-path item outstanding before the ramp-up can commence, laying to rest market concerns that failure to conclude negotiations quickly could delay the project," JPMorgan said in a note to clients.
Rio's two most prominent growth projects outside Australia are Oyu Tolgoi and Simandou, which are both in nations seen as having high sovereign risk.
Mongolia is reportedly looking at increasing taxes on Oyu Tolgoi, which is being developed by Rio subsidiary Turquoise Hill (the former Ivanhoe Mines).
In Guinea, where Rio has spent about $US2bn developing Simandou but is yet to officially approve it at board level, Brazilian giant Vale last month suspended development of its own Simandou project until the project's investment and ownership regime becomes clear.
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