Rio’s Oyu Tolgoi hits another snag

Rio Tinto’s Oyu Tolgoi copper mine venture in Mongolia is in trouble again with the underground development facing further delays.

The delays come as the company awaits financing grants from Mongolia’s government.

In a statement, Rio Tinto said the Mongolian government informed them the financing for Oyu Tolgoi will need approval from the country parliament.

But the Mongolian Parliament is in summer recess presently and the approvals process could take some time.

“In view of the current uncertainty, including continued discussions with the Government on a range of other issues, all funding and work on the underground development will be delayed until these matters are concluded and a new timetable has been agreed,” the company said.

Rio has been in conflict with the Mongolian government over financing for a while this year, with three emergency shareholder meetings taking place already.

CEO of Oyu Tolgoi LLC Cameron McRae said in April Rio has progressed its funding talks for the expansion of Oyu Tolgoi.

The Oyu Tolgoi copper mine was thought to become the world’s third-largest after Grasberg in Indonesia and Escondida in Chile.

The Mongolian government had assured in April it could reach a resolution with Rio in as little as “few weeks”, according to the deputy minister of economic development Ochirbat Chuluunbat.

But this is looking less likely after Rio downgraded its second stage following the Mongolian government’s fear about escalating costs, the SMH reported.

The copper project, worth $US6.2 billion ($6.7 billion), delivered its first shipment earlier this month after much conflict with the Mongolian government over revenue processing and tax.

The first sales were previously supposed to take place in June, with Rio sending invitations to the Mongolian Prime Minister and other guests, to be present for a ceremony to mark the occasion.

But the function was postponed.

Rio then planned a ribbon-cutting ceremony a month ago but that was also deferred.

Australian Mining reported the Oyu Tolgoi mine will be partly funded by taxpayers after Australia’s export credit agency said it would continue lending to multinational companies.

The expansion will be partly funded by the Export Finance and Insurance Corporation.

Rio Tinto said in a statement yesterday it sold its 80 per cent stake in the Northparkes copper mine to China Molybdenum for $US820 million ($892.37 million).

The company said the mine was not big enough to suit the company for the future.

Rio hired Macquarie Group in April to look for a buyer for the mine, located in Central West New South Wales.

The sale is dependent on Rio’s joint-venture partner, Japanese company Sumitomo surrendering its rights to equal China Molybdenum’s offer.

Australian Mining recently visited the Northparkes site, and spoke to managing director Stef Loader.

She had said everyone in the company will feel the impact of  Rio’s recent $3 billion loss, and subsequent radical cost cutting regime.

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