The Government of Mongolia will review and evaluate Rio Tinto’s plans for the Oyu Tolgoi copper-gold project if the development does not prove to be economically beneficial.
Turquoise Hill Resources, a majority-owned subsidiary of Rio Tinto, stated that the government of Mongolia was dissatisfied by the company’s definitive estimate.
The definitive estimate was released in December 2020, and stated that Rio Tinto expects to commence underground production at the project in October 2022 with development capital of US$6.75 billion ($8.7 billion).
The Government of Mongolia has flagged concern that the development capital is too high and has “eroded the economic benefits”.
It is currently seeking a solution to address Oyu Tolgoi financial issues between shareholders and the economic and social issues that concern Mongolia.
The Government of Mongolia (Oyu Tolgoi LLC) has a 34 per cent stake in the Oyu Tolgoi project, along with Turquoise Hill (66 per cent) and Rio Tinto (50.8 per cent).
According to Turquoise Hill, the government is also seeking to replace the existing mine development and financing plan (UDP) of Oyu Tolgoi.
“While acknowledging Oyu Tolgoi’s significant contributions to Mongolia, Turquoise Hill is nevertheless committed to engaging immediately with the Government of Mongolia and Rio Tinto to address the UDP and revisit the sharing of economic benefits arising from the Oyu Tolgoi project in the context of agreeing on a comprehensive financing plan as well as addressing the other issues raised,” Turquoise Hill stated.
The project is also facing a tax dispute between shareholders that is awaiting an arbitration hearing by the United Nations Commission on International Trade Law.
Turquoise Hill stated that it will apply to the tribunal for leave to amend the issues raised in its 2016-2018 tax assessment.
The company has also received a class action lawsuit from the Superior Court in the District of Montreal that alleges Turquoise Hill made material misstatements regarding the schedule, cost and progress to completion of Oyu Tolgoi.
The Oyu Tolgoi mine is expected to produce 480,000 tonnes of copper per year between 2028 to 2036 from its open pit and underground operations.
Rio Tinto’s production timeline in December will enable Oyu Tolgoi to become the world’s fourth largest copper mine by 2030.