Rio Tinto has agreed to write off Mongolia’s outstanding $US2.3 billion debt for its share of the cost of developing the Oyu Tolgoi copper-gold project.
The country’s Prime Minister Oyun-Erdene Luvsannamsrai said Monday that his office had received a letter from the mining company agreeing to write off the debt.
He also said that Rio Tinto agreed to complete the expansion of the underground section of the mine by 2023.
The development started with an open cut mine and then moved to an underground mining project that has been delayed for three years with production slated to start this year in the original 2021 agreement, but pushed out to 2022 in late 2020 and 2023 on October of this year.
It is jointly owned by the Mongolian government with 34% and Rio Tinto’s Canadian subsidiary Turquoise Hill Resources with a 66% stake. Rio owns nearly 51% of Turquoise Hill.
As well, Oyun-Erdene said his office had received a letter from Rio Tinto agreeing to write off the debt, conduct an independent audit into the financing of the project’s underground expansion and improve governance.
Rio’s Chief Executive Officer Jakob Stausholm proposed improved terms for a 2015 financing agreement that underpins the mine’s underground expansion, according to the December 13 letter to Prime Minister Oyun-Erdene Luvsannamsrai posted on Mongolia’s government website.
The Rio CEO had visited Mongolia last month for talks to try and resolve the impasse over the cost, timing and technical aspects of the huge underground mine.
“We have proposed that the benefits of Oyu Tolgoi be in the interests of the Mongolian people,” Oyun-Erdene told a briefing. Writing off the debt would speed up the timeline for when the country can start to receive dividends.
A Rio Tinto spokesman said in a statement the offer made to Mongolia “aims to reset the relationship and allow all parties to move forward together”, without providing details of the debt writedown offer.
“The offer reflects months of discussion between Rio Tinto, Turquoise Hill and the Government of Mongolia to understand the Government’s issues and priorities, deliver greater economic value to Mongolia and build a stronger partnership for a prosperous future for all.”
Turquoise Hill said in a statement on Monday that it had made an offer to the Government of Mongolia in conjunction with Rio Tinto PLC which would see the erasure of loans owing by a Mongolian-owned shareholder in a bid to reset its relationship with the country’s government.
The company said that the offer includes a proposal to forgive and write-off the entirety of US$2.3 billion carry account loan owing by the Mongolian-owned shareholder Erdenes Mongol LLC.
The company said that it would also cancel the underground mine development and financing plan on a go-forward basis.
The deal goes back to 2009 when Rio Tinto and Turquoise signed a long-term, comprehensive investment agreement with the Mongolian government.
Turquoise Hill said that it remains committed to securing approval to begin the undercut as quickly as possible following the entering into of a definitive agreement among the parties.
“The offer follows on months of discussions between Turquoise Hill, Rio Tinto and the Government of Mongolia to understand the Government’s issues and priorities, deliver greater economic value to Mongolia and build a stronger partnership for a prosperous future for all,” the company said.
Rio shares rose 0.05%, not because of this news but because of another rise in iron ore prices on Monday.
