Rio Tinto is a big step closer to getting its Mongolian copper project back on track, after a Mongolian minister confirmed that a tax dispute had been resolved. Mongolia's vice-minister of mining, Oyun Erdenebulgan, confirmed to reporters in Mongolia that the developing nation would settle for a $US30 million payment ($33 million) from Rio; much less than the $US130 million the government originally said was owed.
Resolution of the tax issue solves the major dispute between Mongolia and Rio, and provides hope that other disputes over the cost of building the $US6 billion second stage of the Oyu Tolgoi mine can be solved quickly.
The first stage of Oyu Tolgoi copper and gold mine is already in operation, but the much bigger second stage is where the bulk of the value lies, and the series of disputes had stalled development of the second stage. Today's resolution of the tax dispute vindicates a recent spike in shares of Turquoise Hill Resources; the Canadian subsidiary that holds Rio's stake in Oyu Tolgoi.
Shares in the Canadian-listed company rose 22 per cent over the past week to $C4.38, including a nine per cent rise on Friday morning Australian time and a further 5 per cent rise on Saturday morning Australian time.
The timing of the tax resolution fits with a September 30 deadline that lenders have set for Rio and Mongolia to settle their differences.
Those lenders have pledged just over $US4 billion towards development of the second stage of Oyu Tolgoi, but the deadline for acting on those pledges has already been extended by six months, and it is not certain whether Rio would have been granted a second extension if the September 30 deadline was breached.
Australia's export credit agency Export Finance and Insurance Corporation is one of numerous international banks that have offered to help fund the expansion so long as a decision is made by September 30.