Mongolia cites Oyu Tolgoi progress, but Rio fees must be 'reset'

Mongolia cites Oyu Tolgoi progress, Rio management fees remain a sticking point

The real bounty is underground

Mongolia is confident it can resolve a dispute with Rio Tinto (LON:RIO) over a $5 billion underground expansion of the flagship Oyu Tolgoi copper and gold mine by the end of the year.

Mongolia owns 34% of Oyu Tolgoi located in the South Gobi desert and the government of the Asian nation has been at loggerheads with Rio-controlled Turquoise Hill (TSE:TRQ), owner the remainder of the mine, for months.

The mining ministry's director general of strategic policy and planning, Otgochuluu Chuluuntseren, told reporters on Tuesday that "Mongolia is also seeking guarantees that the mine expansion won’t be subject to cost overruns, and a reset of Rio’s management fees, to be based on revenues earned rather than money spent."

Neither Turquoise Hill nor Rio Tinto on Tuesday commented on the talks which are set to continue on October 7 in the capital Ulan Bator and the miners' share prices showed little reaction to the comments.

The mine, which shipped its first copper in July, is set to contribute as much as a third of the nation's economy if the second phase underground expansion were to go ahead, with the final bill for the project pegged at as much as $14 billion.

Foreign direct investment in the country dropped 17% to $3.9 billion in 2012.

This year it's even worse with the Asian nation attracting a full $1 billion or 42% less during the first half of 2013.