Rio Tinto begins underground work at vast Mongolia copper mine

Underground operations have finally begun at a copper mine in Mongolia, official media has reported, ending years of delays for Anglo-Australian giant Rio Tinto.

The massive Oyu Tolgoi gold-copper mine has been mired in controversy for years and disrupted by protests from locals worried about environmental damage and foreign influence.

While it started production from an open-pit mine several years after Mongolian authorities inked a deal in 2009, Rio Tinto secured a multi-billion agreement in 2015 paving the way for a second and more valuable phase underground.

Some 80 percent of the mine's reserves are believed to lie underground.

"The commencement of Oyu Tolgoi underground mining operations demonstrates to the world that Mongolia can work together with investors in a sustainable manner and become a trusted partner," Mongolian Prime Minister Luvsannamsrai Oyun-Erdene said Tuesday in a ceremony marking the start of operations, according to official news agency Montsame.

The report added that both sides reached an agreement on controversial issues following constructive talks.

Oyun-Erdene said he expected the underground mine to be fully operational within its agreed period or in the first quarter next year, without incurring extra debts for Mongolia.

The mega-project has been expected to contribute up to one-third of Mongolia's gross domestic product once fully operational.

Rio Tinto and subsidiary Turquoise Hill Resources are to be responsible for added financing until the first half of 2023, when sustainable underground production is achieved, said Montsame.

Oyu Tolgoi is 66 percent owned by Turquoise Hill Resources and 34 percent by the Mongolian government.

Turquoise Hill said in a news release that it "expects to begin caving operations in the coming days".

Shares of Turquoise Hill Resources rose around 16 percent in New York overnight on the news, and following its announcement that it had reached an agreement to waive $2.4 billion in debt for Mongolia.