Rio Tinto’s most important growth project has suffered another setback, with financing of the Oyu Tolgoi expansion in Mongolia delayed indefinitely
November 15, 2013 Leave a comment
Rio Tinto’s Mongolia mine hits another snag
November 15, 2013 – 9:17AM
Rio Tinto’s most important growth project has suffered another setback, with financing of the Oyu Tolgoi expansion in Mongolia delayed indefinitely. Rio said ongoing quibbles with the Mongolian Government remained unresolved, meaning that a global effort to raise $US4 billion for the second stage of the mine could not be completed in the near term.The Rio subsidiary in charge of the project – Turquoise Hill Resources – will now undertake a rights issue to sustain itself, and Rio will extend a bridging loan out to January.
Rio will underwrite the rights issue, meaning it is likely to increase its stake in Turquoise Hill and therefore the giant copper and gold mine.
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The second stage of the project has been caught up in dispute for some time, with Mongolia wanting a bigger slice of the wealth from the mine, and expressing concerns with the costs that Rio incurred while building the first stage.
Rio has previously moved to reduce the scale of the expansion, in a bid to adhere with Mongolia’s desire for lower costs.
In today’s statement, the remaining issues of disagreement were listed as; “the sharing of economic value from the project, clarification of initial development and construction costs, access to water, and the timing, completion and Oyu Tolgoi LLC shareholder approval of the feasibility study for the expansion of operations.”
But it was not all bad news in today’s statement, with Rio revealing that Oyu Tolgoi customers were now able to collect the copper concentrate bought from the mine.
The concentrate had been sitting in warehouses on the Chinese border, and custom officials had prevented customers from collecting their purchases.
But Rio said that impass had been resolved, and about 5000 tonnes had been collected so far.
The ructions in Mongolia come ahead of a big couple of weeks in Australia for the company.
A decision over how quickly to expand its iron ore division to 360 million tonnes is expected soon, with Rio hosting a major investor day in Sydney within the next three weeks.
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