By Alex MacDonald
LONDON--The Mongolian government Tuesday said half of the
concerns about the development of Mongolia's massive Oyu Tolgoi
copper and gold mine have been resolved and meeting will be
convened next week to whittle away at the remaining issues.
Rio Tinto PLC (RIO), the project operator and major shareholder,
and the Mongolian government held an Oyu Tolgoi LLC board meeting
last week in London in which they resolved 15 out of the 30 urgent
issues that had led to the suspension of the $5.1 billion expansion
project.
The board agreed among other things that all Oyu Tolgoi licenses
owned by third parties should be transferred to Oyu Tolgoi LLC such
that the Mongolian government will own a 34% stake over the entire
licensed Oyu Tolgoi deposit area. This means that two licenses
part-owned by Canada-listed mining company Entree Gold Ltd. (EGI)
will be transferred to Oyu Tolgoi LLC. As part of the transfer, the
Mongolian government will receive an additional $1.4 billion over
the duration of the project, the government said in a
statement.
Anglo Australian Rio Tinto declined to comment on the matter.
The Oyu Tolgoi project is 66% owned by Canada-based Turquoise Hill
Resources Ltd. (TRQ), which in turn is majority owned by Rio Tinto.
The Mongolian government owns the remaining 34% stake in the
mine.
The Mongolian government and Rio Tinto have been at loggerheads
over the investment terms of an agreement signed by both parties in
2009. The government has been pressing Rio Tinto to improve the
terms of the deal amid escalating costs. For its part, Rio Tinto
wants to ensure that the government keeps to the original
investment agreement.
This summer, Rio Tinto postponed the underground mine expansion
and announced plans to lay off as many as 1,700 workers after the
government announced that any provisional financing for the project
would have to be first approved by Mongolia's parliament.
The board will meet again on Monday to address three key
outstanding issues: how to monitor and reconcile project cost
overruns, submit an authorized registration of the expansion
project plan and conduct an in-depth review of additional project
financing.
At full output, Oyu Tolgoi is set to produce an average of
450,000 metric tons of copper and 330,000 ounces of gold a year, as
well as silver and molybdenum, a metal used to strengthen steel.
The International Monetary Fund has estimated the mine will
generate up to one-third of Mongolia's gross domestic product when
it reaches full production, expected in 2021.
-Write to Alex MacDonald at alex.macdonald@wsj.com
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