Busy times for Rio Tinto (RIO) – while fighting off the silliest idea for a while from an Australian government – the Tony Abbott supported inquiry into iron ore – the giant miner has also put around $US1 billion of Australian and NZ based aluminium, alumina and bauxite assets on the market (again) and this morning revealed it had overcome a major hurdle to the expansion of its huge copper project in Mongolia.
Of the three, the latter is the most important from a medium and long term point of view because it brings closer the huge expansion of the underground copper ore at the project, called Oyu Tolgoi.
Rio has already invested $US6 billion in the open cut operation at the project, but needed agreement with the Mongolian government on how to share costs and profits for the underground project. There had been market talk the government was anxious to clear the decks to get the project back on track.
Rio has kept the panel of banks involved in the financing updated and has successfully extended deadlines for financing and other requirements for the second phase. That means it should be easier and faster to negotiate the funding package.
In a statement issued this morning, Rio said “The development of the underground mine at Oyu Tolgoi in Mongolia has taken a significant step forward today with the signing of the Oyu Tolgoi Underground Mine Development and Financing Plan (the Plan) by the Government of Mongolia, Turquoise Hill Resources and Rio Tinto. The Plan addresses the key outstanding shareholder issues and sets out an agreed basis for the funding of the project.
"With a new pathway to development of the underground mine agreed, the focus now shifts to finalising the project finance, the feasibility study and securing all necessary permits so that the underground mine development can proceed."
Prime Minister of Mongolia MP Chimediin Saikhanbileg said “Mongolia is back to business. Oyu Tolgoi is a world-class copper-gold asset and its further development is of great economic significance for Mongolia. We have finalised a way forward with our partners which re-establishes the foundations of a new and constructive relationship based on mutual trust and our joint long-term commitment to Mongolia’s growth.
“Unlocking Oyu Tolgoi’s underground mine will have a significant impact on the Mongolian economy, which will benefit Mongolian citizens for generations to come. Our joint agreement clearly positions Mongolia as an attractive country for investment and underscores the fact that Mongolia is open for business”.
"The construction of the first phase of the pioneering Oyu Tolgoi project – the open-pit mine – was completed on schedule in less than 24 months. The operation celebrated one million tonnes of copper concentrate shipped in March 2015, less than two years after the first production left the mine. Oyu Tolgoi has a workforce that is 95 per cent Mongolian and Oyu Tolgoi LLC has paid $1.3 billion in taxes, fees and other payments to date," Rio said in this morning’s statement.
