LONDON (CU)_For several years now, the Rio Tinto Group has been looking to expand the giant Oyu Tolgoi copper project in the region of Khanbogd, in southern Mongolia. However, these efforts have been beset by cost blowouts and years of disputes and delays. Therefore, the chief executive of the mining giant has now proposed improved terms for a 2015 financing agreement with the government of the Mongolia, with the aim of pushing forward with the planned expansion.
In a letter addressed to Prime Minister Oyun-Erdene Luvsannamsrai on Monday (13 Dec), Rio’s CEO Jakob Stausholm made an enticing offer to the Mongolian government, proposing the cancellation of US$2.3 billion in debt owed by the Asian country to the miner. According to Stausholm, the writing off of the debts would speed up the timeline when Mongolia can start receiving dividends for the copper project.
Oyu Tolgoi is one of the largest gold and copper deposits in the world, in which the Mongolian government has an ownership of 34 per cent. The rest is held by Turquoise Hill Resources, a majority-owned subsidiary of the Rio Tinto Group.
While it is Rio’s flagship growth project, the mining giant has been facing a host of challenges in relation to the initiative over the recent years. The costs of the underground expansion has already spiralled, inflating by a whopping US$1.4 billion more than originally anticipated, and the Mongolian government is pushing for better terms as a result. On the other hand, the start of the project has been further delayed by pandemic-related disruptions, which have also added to cost overruns.
Accordingly, Rio Tinto made the recent offer, which aims to “reset the relationship and allow all parties to move forward together”. It will deliver greater economic value to the Asian nation and build a stronger partnership between the parties, the miner said in a statement.
