Rio Tinto鈥檚 (ASX, LON, NYSE: RIO) chief executive Jakob Stausholm聽met this week with Mongolia鈥檚 Prime Minister Luvsannamsrain Oyun-Erdene, aiming to iron out issues still threatening the future of the company鈥檚 vast Oyu Tolgoi copper-gold mine.
The ongoing expansion of the project in the Gobi desert has been plagued by delays and costs overruns, which have triggered the Mongolian government鈥檚 ire to the point of threatening to revoke the 2009 investment agreement, which underpins the mine development.
Relations between Rio Tinto and the Central Asian nation hit a fresh low聽in August, when an independent review rejected the mining giant鈥檚 explanation for the project鈥檚聽delays聽and climbing costs.聽聽
Mongolia鈥檚 position is that Rio should cover cost overruns while debts accrued on Ulaanbaatar鈥檚 share of the project (34%) should be fully removed, .
It is understood that L. Oyun-Erdene also wants Rio Tinto and its majority-owned Turquoise Hill Resources to revisit the economic benefits that the expansion will bring to the state鈥檚 coffers.
鈥淭his week for the first time since becoming Chief Executive, I was able to return to the beautiful wintry country of Mongolia, home to Oyu Tolgoi, the world鈥檚 largest greenfield underground copper mining project,鈥� Stausholm said in a post on LinkedIn on Wednesday.
He also engaged other ministers and members of parliament, 鈥渢o hear and understand their concerns,鈥� he said.
鈥淭his was a vital first step in our relationship reset that engages based on trust and we are committed to earning it step by step,鈥� he said.
Sources familiar with the matter told 九游下载apk that Rio is prepared to make concessions to the Mongolian government to complete the troubled project, including reducing interest rates on loans to the nation to fund its share of the construction costs.
Rio may also consider a 鈥渞estructuring鈥� of Oyu Tolgoi鈥檚 ownership order, the sources said.
From 2020 to 2022 to 2023
A definitive estimate for the development of the new mine level,聽announced in December 2020,聽pegged the cost of聽Oyu Tolgoi鈥檚聽underground聽section聽at聽$6.75 billion, about $1.4 billion higher than聽its original estimate聽in 2015.聽聽
First production,聽initially expected in late 2020, was rescheduled for聽October 2022,聽and聽Rio聽blamed聽unfavorable聽geological聽conditions聽as the main cause for the cost聽and timeline review. The聽independent report聽published in August suggested it was聽rather聽caused by the miner鈥檚 mismanagement.聽聽
贵颈苍补苍肠颈补濒听regulators in the UK聽and US kicked off their own probes into Rio鈥檚 disclosures聽about the delays and swelling costs, which聽hit a new high two months later.
Shares in Canada鈥檚 Turquoise Hill Resources (TSX, NYSE: TRQ), in which Rio has a 50.8% stake, cratered on October 14 after announcing that the expansion would require an additional $1.2 billion. It also said that due to covid-19 related issues first commercial production would be no earlier than January 2023, around three months鈥� later than the previous target.
Oyu Tolgoi is Rio Tinto鈥檚 main copper growth project.聽Once completed, the mine鈥檚 underground section will lift production from 125,000鈥�150,000 tonnes in 2019 to 560,000 tonnes at peak output, which is now expected by 2025 at the earliest.
By 2030, the operation would be the world鈥檚 fourth largest copper mine,聽.
The mine is the country鈥檚 biggest source of foreign direct investment, having created thousands of jobs and generating almost $3 billion of taxes and fee revenue over the past decade.