Rio and partners fall out over Mongolian riches
THERE was a nod to Mongolia's nomadic heritage when Rio Tinto opted to use traditional ''ger'' tents for workers' accommodation at their massive Oyu Tolgoi mine.
The huts rise like mushrooms in this patch of the south Gobi Desert, surrounding a $16 billion project that will soon be one of the world's biggest producers of both copper and gold.
But while the workers have bunkered down in their traditional digs, keeping the project's corporate partners inside the same proverbial tent is proving far more difficult for Rio Tinto.
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Long-running tensions between Rio and its Oyu Tolgoi partner - Ivanhoe Mines - may flare again today, with the Canadian company poised to attack Rio for comments made about the project last week.
Ivanhoe - which owns 66 per cent of Oyu Tolgoi - has accused Rio of releasing ''unauthorised and incomplete information concerning the Oyu Tolgoi project'' during a briefing for investors in New York and London on Tuesday.
Rio owns 48.5 per cent of Ivanhoe and is responsible for managing Oyu Tolgoi, despite its indirect stake of just 32 per cent.
Ivanhoe chief executive Robert Friedland has promised to list his claims against Rio Tinto's senior management in a statement this morning.
Speculation persists that Mr Friedland's anger may have been roused by Rio Tinto Copper boss Andrew Harding, who told last week's briefing that scheduling targets could be delayed if the preferred option for supplying electricity was unable to proceed.
Speaking in Ulan Bator over the weekend, Mr Harding said those comments were not a revelation to the market, and he had no idea which aspect of the briefing had angered Mr Friedland.
''I have as much information as you would … I just don't have any insight,'' he said.
The stoush is the latest in a series of battles between Ivanhoe and Rio, which is widely expected to launch a takeover for Ivanhoe once a ''standstill clause'' preventing the purchase of further shares expires in January.
Ivanhoe recently sought to protect itself by launching a controversial shareholder rights plan, but that has since landed the feuding companies in arbitration.
Mr Harding rejected suggestions the Oyu Tolgoi project - considered the world's biggest untapped copper resource and strategically crucial to the future of Mongolia - could be undermined by the deteriorating relationship between the two companies.
''We have a professional working relationship with them,'' he said.
''The value comes from building it and producing the copper … as partners, Ivanhoe, Rio Tinto and the government have always focused on that.''
But Ivanhoe was not the only project partner putting a dampener on the party thrown at Oyu Tolgoi over the weekend to mark the halfway mark in construction.
The Mongolian government retains 34 per cent ownership of Oyu Tolgoi, and there are growing signs that lawmakers want a bigger slice of the mine's profits.
Rumblings from a group of 20 MPs earlier this month have been endorsed by the Mongolian Finance Minister Sangajav Bayartsogt, who confirmed the government would seek to revise the investment agreement.
Rio Tinto's Mongolia country director Cameron McRae said the company had not been notified of any proposed changes to the investment arrangement, and he warned that revisiting the contract would damage investor confidence.
''An unstable environment, where changes to agreements are forced, leads to investors being very apprehensive and uncertain … stability of this agreement sends a very important signal to the world from Mongolia,'' he said.
Close to $3.3 billion of the $6 billion first stage of the project will have been spent by the end of 2011, and Mr Harding said much of the work was ahead of schedule. By 2018, the mine should be producing 450,000 tonnes of copper and 330,000 ounces of gold per year.
The reporter attended a site tour of Oyu Tolgoi as a guest of Rio Tinto.
The huts rise like mushrooms in this patch of the south Gobi Desert, surrounding a $16 billion project that will soon be one of the world's biggest producers of both copper and gold.
But while the workers have bunkered down in their traditional digs, keeping the project's corporate partners inside the same proverbial tent is proving far more difficult for Rio Tinto.
Advertisement: Story continues below
Long-running tensions between Rio and its Oyu Tolgoi partner - Ivanhoe Mines - may flare again today, with the Canadian company poised to attack Rio for comments made about the project last week.
Ivanhoe - which owns 66 per cent of Oyu Tolgoi - has accused Rio of releasing ''unauthorised and incomplete information concerning the Oyu Tolgoi project'' during a briefing for investors in New York and London on Tuesday.
Rio owns 48.5 per cent of Ivanhoe and is responsible for managing Oyu Tolgoi, despite its indirect stake of just 32 per cent.
Ivanhoe chief executive Robert Friedland has promised to list his claims against Rio Tinto's senior management in a statement this morning.
Speculation persists that Mr Friedland's anger may have been roused by Rio Tinto Copper boss Andrew Harding, who told last week's briefing that scheduling targets could be delayed if the preferred option for supplying electricity was unable to proceed.
Speaking in Ulan Bator over the weekend, Mr Harding said those comments were not a revelation to the market, and he had no idea which aspect of the briefing had angered Mr Friedland.
''I have as much information as you would … I just don't have any insight,'' he said.
The stoush is the latest in a series of battles between Ivanhoe and Rio, which is widely expected to launch a takeover for Ivanhoe once a ''standstill clause'' preventing the purchase of further shares expires in January.
Ivanhoe recently sought to protect itself by launching a controversial shareholder rights plan, but that has since landed the feuding companies in arbitration.
Mr Harding rejected suggestions the Oyu Tolgoi project - considered the world's biggest untapped copper resource and strategically crucial to the future of Mongolia - could be undermined by the deteriorating relationship between the two companies.
''We have a professional working relationship with them,'' he said.
''The value comes from building it and producing the copper … as partners, Ivanhoe, Rio Tinto and the government have always focused on that.''
But Ivanhoe was not the only project partner putting a dampener on the party thrown at Oyu Tolgoi over the weekend to mark the halfway mark in construction.
The Mongolian government retains 34 per cent ownership of Oyu Tolgoi, and there are growing signs that lawmakers want a bigger slice of the mine's profits.
Rumblings from a group of 20 MPs earlier this month have been endorsed by the Mongolian Finance Minister Sangajav Bayartsogt, who confirmed the government would seek to revise the investment agreement.
Rio Tinto's Mongolia country director Cameron McRae said the company had not been notified of any proposed changes to the investment arrangement, and he warned that revisiting the contract would damage investor confidence.
''An unstable environment, where changes to agreements are forced, leads to investors being very apprehensive and uncertain … stability of this agreement sends a very important signal to the world from Mongolia,'' he said.
Close to $3.3 billion of the $6 billion first stage of the project will have been spent by the end of 2011, and Mr Harding said much of the work was ahead of schedule. By 2018, the mine should be producing 450,000 tonnes of copper and 330,000 ounces of gold per year.
The reporter attended a site tour of Oyu Tolgoi as a guest of Rio Tinto.
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