Rio Tinto and Mongolia settle dispute over Oyu Tolgoi copper mine

An employee looks at the Oyu Tolgoi mine in Mongolia’s South Gobi region June 23, 2012. REUTERS/David Stanway/File Photo

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Jan 25 (Reuters) – Rio Tinto Plc (RIO.AX), (RIO.L) and the Mongolian government said on Tuesday they had reached an agreement to end a long-running dispute over the expansion project $6.93 billion from Oyu Tolgoi copper. – gold mining project.

The deal marks a positive development for the British-Australian mining giant, which is reeling from Serbia’s rejection last week of its lithium mine project as well as local opposition to projects in Guinea, the United States. United and elsewhere.

“It’s a major relief. It’s a huge step forward for us,” Rio chief executive Jakob Stausholm told Reuters by phone from Ulaanbaatar before a flight to the mine site for a ceremony. inauguration later Tuesday with Prime Minister Oyun-Erdene Luvsannamsrai. .

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“We are very comfortable with this outcome and, more than anything, with achieving a full reset of the relationship,” said Stausholm, who became CEO last year.

Stausholm has traveled to Mongolia several times in recent months to try to save the project amid growing concerns that the project’s economic benefits for Mongolians are eroding.

Mongolia owns 34% of Oyu Tolgoi, one of the largest known copper and gold deposits in the world. Rio controls the rest through its 51% stake in Toronto-listed Turquoise Hill Resources Ltd (TRQ.TO) and operates the mine.

As part of the deal, Turquoise Hill will forgive $2.4 billion in debt owed to it by the Mongolian government. Additionally, operations will soon begin on the underground part of Oyu Tolgoi, with first production expected in the first half of 2023.

The expansion will be paid for in cash, rescheduling of existing debt repayments and prepaid sales of copper concentrate to Turquoise Hill.

The project has also committed to buying power from the Mongolian grid once it is able to meet supply. Rio said it would help add renewable energy to the grid. Meanwhile, the government has extended a deal to import power from China until 2023.

The original 2009 Rio agreement on the mining project called for the construction of a new coal-fired power station to provide electricity. The updated deal does not include that plant and instead Rio aims to source wind power, the company said.

Stausholm said the multiple terms of the deal reflected “an elegant solution” to complex issues that had strained relations with the government. “It is possible to do something for the benefit of the Mongolian people and also for the benefit of our investors,” he said.

Luvsannamsrai, Prime Minister of Mongolia, said the agreement “demonstrates to the world that Mongolia can work with investors in a sustainable way and become a trusted partner”.

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Reporting by Ernest Scheyder in Houston and Praveen Menon in Wellington; Editing by Lisa Shumaker

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