Wednesday, July 9, 2014

Mongolia Says Delay at Copper Mine With Rio Not Its Fault

Mongolia’s prime minister urged Rio Tinto Group to hasten development of the underground expansion at the Oyu Tolgoi copper mine, shifting blame for the mine’s slowdown away from his government.

“We are acting, and at the same time we are asking Rio Tinto why they are being slow to act,” Altankhuyag Norov told Bloomberg TV Mongolia on July 7. “We very much hope Rio Tinto will act quickly.” Altankhuyag said there is “no single cause to blame the Mongolian government” for project delays.

Rio and the Mongolian government have been at loggerheads for more than a year on the terms of a $4 billion project finance package to fund expansion at the underground mine, where 80 percent of Oyu Tolgoi’s wealth lies. In August, Rio laid off 1,700 workers at the venture following a decision to delay expansion.

Rio controls the mine through its 51 percent ownership of Turquoise Hill Resources Ltd. (TRQ), the Vancouver-based company that has a 66 percent stake in the mine. The Mongolian government owns the remaining 34 percent.

Talks between the two sides continue before a Sept. 30 deadline for the project-financing terms. In May, 14 of 15 banks agreed to extend their respective commitment letters for the mine’s expansion, according to a Turquoise Hill statement.

“There might be delays regarding the general state of the global economy and specifically on Rio Tinto’s part,” Altankhuyag said. “But on the Mongolian government side, nothing is held back or slowed down.”

Tax Dispute

Illtud Harri, a London-based spokesman for Rio Tinto, declined to comment. Nick Archer, a spokesman for Oyu Tolgoi in Ulaanbaatar, the Mongolian capital, declined to comment.

In the latest issue to arise between the government and the project developers, Mongolia’s Tax Authority last month claimed Oyu Tolgoi LLC has unpaid taxes, penalties and disallowed entitlements associated with the venture.

Turquoise Hill said Oyu Tolgoi LLC has paid all taxes and charges required under its agreement with the government and has complied with the country’s laws. The disputed amount is about $130 million, Ganbold Davaadorj, a director of Oyu Tolgoi, said in a June 23 interview.

To contact the reporter on this story: Michael Kohn in Ulaanbaatar at
To contact the editors responsible for this story: Jason Rogers at John Viljoen, Ana Monteiro

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