Mongolia tweets OK for Oyu Tolgoi shipments
The long-running dispute between the Mongolian government and Rio Tinto (LON:RIO) over the massive Oyu Tolgoi copper-gold mine may be finally over.
Mongolia owns 34% of Oyu Tolgoi located in the South Gobi desert.
The government of the Asian nation has been at loggerheads with operator Turquoise Hill Resources (TSX:TRQ), which is controlled by Rio and the owner the remainder of the mine, for months.
Shipments could start later this week as the negotiations over the repatriation of earnings – just one of many points of contention between the parties – from the mine may have been settled.
“There is no significant problem with the Oyu Tolgoi mineral export contract. The first shipments will start on July 9.”
First copper concentrate exports to China – Turquoise Hill has already produced 40,000 tonnes worth – were scheduled for June 14, postponed till June 21, and again last week
It was later confirmed by Oyu Tolgoi CEO Cameron McRae in a letter to employees that promised further details tomorrow:
I am delighted to announce that following a meeting of the Board of Director’s on Friday, we are now in the position to ship Oyu Tolgoi’s very first copper concentrate to international markets. We hope to be able to make the first shipment in the coming days, possibly as soon as this Tuesday, 9 July.
Mongolian government officials demanded to keep revenue from the giant copper and gold project in domestic banks.
The drawn out negotiations have forced Turquoise Hill – which has already plonked $6 billion on the massive project – to fund construction from its own coffers under a temporary month-to-month budget.
Mongolia has long coveted a bigger slice of the mine and has twice in the past couple of years floated proposals to take majority control.
Political rhetoric over a bill before the Mongolian parliament – elected last year on promises of greater resource nationalism – which contains sweeping changes for the mining industry has only added to the headaches of Rio and other foreign investors in the country.
Oyu Tolgoi will increase the average earnings of Mongolians by 60% – today the country ranks 130th in the world based on GDP per capita at $3,000 and 22% of the population live below the poverty line.
At full capacity the mine is set to produce more than 1.2 billion pounds of copper worth nearly $4 billion at today's prices, 650,000 ounces of gold ($800 million) and 3 million ounces of silver.
Of the $5.8 billion in annual earnings 71% will flow into Mongolian state coffers thanks to the government's 34% stake and the royalties, income tax, VAT, customs duty and other taxes it will receive.