Australian taxpayers will assist Rio Tinto fund its Oyu Tolgoi mine expansion project in Mongolia, after Australia’s export credit agency decided to continue lending to multinational companies.
The $US5.1 billion mine expansion will be partly funded by the Export Finance and Insurance Corporation despite calls for the agency to focus on small to medium exporters which have trouble securing loans elsewhere, SMH reported.
An EFIC spokesperson confirmed it would be involved in financing the second stage of the mine which is a joint venture between Rio and the Mongolian state but wouldn’t reveal the size of the loan.
Rio has reportedly already secured almost half of the $US5.1 billion required for the project which includes over 250 kilometres of underground tunnels, and the World Bank's International Finance Corporation is also said to be involved in the project.
Australia's Productivity Commission is urging EFIC to ''substantially reorientate'' its focus toward smaller exporters, rather than big companies who have the means to source funding elsewhere at low interest rates.
A view that has received support from the Gillard government as the Labor party moves to reform the agency.
EFIC’s decision to fund the mining giant has been criticised by Jubilee Australia executive director Carmelan Polce who said there would be no shortage of lenders in the market that would be finance Oyu Tolgoi.
The SMH reported that ANZ and NAB have already pledged support for the mine expansion which has been ranked as a ''Category A'' project by EFIC, meaning it has the potential of being affected by “significant adverse environmental and/or social impacts”.
Australian Mining recently reported that Rio and the Mongolian government have been in dispute over alleged cost overruns and management control.
At the time the government said the company should’ve paid taxes last year and increased financial transparency is required.
Newly appointed Rio chief executive Sam Walsh last week told the company’s shareholder meeting that good progress had been made, and first mine production was expected before June 30.