Rio Tinto, Mongolia Reach Deal To Advance Oyu Tolgoi Copper Project

Rio Tinto Plc (RTNTF, RIO, RIO.L, RTPPF), Turquoise Hill Resources (TRQ) and the Government of Mongolia have reached an agreement that will lead to the start of underground operations at the Oyu Tolgoi copper mine, the Anglo-Australian mining giant said in a statement. The agreement will end a long-running dispute over the expansion project for the Oyu Tolgoi copper-gold mining project.

The underground operations is expected to begin in the coming days, with first sustainable production expected in the first half of 2023.

As per the deal terms, Turquoise Hill will waive a $2.4 billion carry account loan to the Mongolian government.

Rio Tinto and Turquoise Hill have amended the Heads of Agreement signed in April 2021 to ensure they appropriately fund Oyu Tolgoi. The capital forecast for the project is $6.925 billion, including $175 million of known COVID-19 impacts to the end of 2021. Forecasted remaining undergound capital expenditure is approximately $1.8 billion.

The two companies also pledge to improve cooperation with the state-owned company Erdenes Oyu Tolgoi in monitoring the underground development and enhancing environmental, social and governance related matters.

The Oyu Tolgoi mine is a combined open pit and underground mining project in Khanbogd sum within the south Gobi Desert, about 235 kilometres east of the Ömnögovi Province capital Dalanzadgad. The site was discovered in 2001 and is being developed as a joint venture between Turquoise Hill Resources (a majority owned subsidiary of Rio Tinto) with 66% ownership and the Government of Mongolia with 34%. The mine began construction as of 2010 and shipped its first batch of copper on 9 July 2013.

Disagreement between the Mongolian government and Rio Tinto came to a head in 2013, with the government urging Rio Tinto to settle the US$340 million tax issue and the cost overruns from the initially planned US$5.1 billion to US$7.1 billion during the initial stage of the project.

In July 2013, the shares in Turquoise Hill Resources dropped 20% after a dispute between Tserenbat Sedvanchig, the executive director of Erdenes Oyu Tolgoi, and Rio Tinto. Sedvanchig was fired in August and replaced by Davaadorj Ganbold, a former deputy minister and member of parliament. In the meantime, Rio Tinto cut 1700 Mongolian employees from the mining operation.