Thursday, July 10, 2014

Mongolia blames Rio Tinto for delays at Oyu Tolgoi

The long-running dispute between the Mongolian government and Rio Tinto (LON, ASX, NYSE:RIO) over a $6.6 billion underground expansion of the Oyu Tolgoi copper mine continues to drag on as the Central Asian country called Rio to speed up the project, in a move that aims to shift blame for delays away from the government.

In an interview with Bloomberg TV Tuesday, the country’s Prime Minister, Altankhuyag Norov, emphasized there was “no single cause to blame the Mongolian government [for the interruptions].”

The massive Oyu Tolgoi's open pit mine began operating last year, but an underground expansion was put on hold shortly after, as the Mongolian government became concerned that cost overruns would cut into profits.

Talks between the world’s second largest mining company and Mongolia on the expansion and reworking of the initial 2009 deal that first triggered an investment boom in the country, have dragged on for more than a year. Both sides provided fresh faces for the Oyu Tolgoi board in September to break the impasse and resumed talks in December.

In March, Rio Tinto said talks with the government on restarting development had been "constructive," and that the feasibility study would be finished by the end of June.

In May the mining giant fired about 300 workers from Oyu Tolgoi following a review aimed at reducing costs.

Financing commitments needed to build the underground mine are set to expire Sept. 30.

For 2014, Oyu Tolgoi —located 80 kilometers north of the Chinese border— is targeting production of 150,000 to 175,000 tonnes of copper in concentrates and 700,000 to 750,000 ounces of gold in concentrates. But after phase 2 the mine in the southern Gobi desert could produce more than 1.2 billion pounds of copper, 650,000 ounces of gold and 3 million ounces of silver each year.

Oyu Tolgoi, operated by Canadian Turquoise Hill Resources (TSX, NYSE:TRQ), will account for 30% of the economy of the nation of just over 3 million people.

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