Rio Tinto has advanced its funding talks for an expansion of its Mongolian Oyu Tolgoi mine that’s been estimated to cost $5.1 billion.
“The process is now well advanced,” Cameron McRae, chief executive officer of Oyu Tolgoi LLC, a unit of Rio Tinto, said.
The proposed underground mine expansion includes 250 kilometers of tunnels and may cost $5.1 billion, according to a report last month by Rio Tinto unit Turquoise Hill Resources Ltd, Business Week reported.
Production is expected to ramp up at the existing $6.6 billion open pit mine in June.
Oyu Tolgoi is 66 per cent owned by Rio with the remainder controlled by the Mongolian state.
Rio and the Mongolian government have been in dispute over alleged cost overruns and management control.
Already this year three emergency shareholder meetings have been held.
The government has said the company should’ve paid taxes last year and increased financial transparency is required.
“Constructive progress continues to be made,” McRae said.
“The focus is both on reviewing progress to date and ensuring that production and future expansions are delivered together – and that critical agreements and finance are supported.”
According to the Wall Street Journal, the Mongolian government is confident it can resolve the dispute over the copper and gold project in as little as a "few weeks," Mongolia's deputy minister of economic development, Ochirbat Chuluunbat, said on Wednesday.
The government is concerned that rising costs could delay its ability to benefit from the project’s profits.
"There is no big problem," Chuluunbat said.
He said he expects a solution to the issues before the June 28 presidential elections.
"It is negotiable. It's not a big deal," he added, noting that the parties involved should reach a solution soon.
Discussing the disagreement McRae said in a speech on the same day that the two sides have made "constructive progress".
"Whilst some of the issues are complex, I am confident these discussions will resolve them and we will deliver the promise of Oyu Tolgoi together," he added.
According to Chuluunbat the cost for developing the first phase of the mine has increased to over $6 billion from an initial $4.6 billion capital expenditure budget.
The cost for the second phase has also risen as a result of a 30 per cent increase in the cost of developing the underground mine.