Bloomberg feb 7 Talks between Rio Tinto Group and the Mongolian government will resume later this month, with government concerns over their jointly owned Oyu Tolgoi copper and gold mine unresolved.
A shareholders meeting in Ulan Bator today ended with the promise of more discussion of outstanding issues at the end of February. For the government, these include overspending on the mine, furthering Mongolian participation in its management and increasing the number of Mongolian companies that can benefit from the project, including the use of a Mongolian bank, it said in a press statement today.
The cost of building the Oyu Tolgoi mine rose 16 percent to $6.6 billion, according to a Rio Tinto statement responding to criticism of the project in Mongolia’s parliament last week. The estimate compares with the initial 2010 costing of $5.7 billion. The mine is 66 percent owned by Rio unit Turquoise Hill Resources Ltd. and 34 percent by Mongolia’s government.
President Tsakhia Elbegdorj said last week Mongolia should have more control of the mine that will be the biggest contributor to its economy once it’s in full production.
The president’s comments heightened tension with London- based Rio over the ownership and future development of the project, which is currently the world’s biggest copper mine under construction. Rio is considering a temporary halt to work to protest government demands for a greater share of profit, two people familiar with the plans said last week.
Rio Tinto hasn’t explained the reasons why the project has gone over budget, Mining Minister Davaajav Gankhuyag said at a press conference in Ulan Bator today.
Tax Issue
Finance Minister Chultem Ulaan said at the press conference that Oyu Tolgoi paid no taxes in 2012. According to a media release posted on its website Feb. 5, Oyu Tolgoi was Mongolia’s sixth-biggest taxpayer in 2011, before the mine was operational, and paid $280 million in 2012 in taxes and other government fees. The company also spent more than $1.1 billion during 2010-2012 with Mongolian suppliers.
“Oyu Tolgoi has delivered construction ahead of schedule and in line with the budget submitted to the Oyu Tolgoi board and government shareholder representatives,” said Rio Tinto Copper Chief Executive Andrew Harding in a statement today. “We produced our first copper concentrate last week, and remain on schedule for commercial production in the first half of 2013.”
According to the statement, construction remains on budget, “coming in at $6.2 billion, which is in line with the project estimate submitted to the Oyu Tolgoi board and government shareholders in December 2010.”
To contact the reporter on this story: Michael Kohn in Ulan Bator at mkohn5@bloomberg.net
To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net
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