Rio Tinto bets big on Mongolia, opens local office

Mining giant Rio Tinto (LON:RIO) is setting up a new office in Mongolia, independent from its massive Oyu Tolgoi copper and gold mine, which will focus on exploration and local links.

The opening of the new unit, based in capital city Ulaanbaatar, shows Rio's vote of confidence in a nation that has recently been on Oyu Tolgoi’s case.

The new office, separate from Rio's presence in the Oyu Tolgoi mine, will have 80 staff members by the end of the year, focusing on exploration, technologies and local ties.

First, the country’s government served the mine with a new bill for $155 million in back taxes. Rio Tinto-controlled Turquoise Hill (TSX, NYSE:TRQ) said at the time the charge related to an audit on taxes imposed and paid by the mine operator between 2013 and 2015. It added it's disputing the assessment.

On Thursday, the southern Gobi Desert-based mine had to declare force majeure after protests by Chinese coal haulers disrupted deliveries near the border.

But Rio is conscious of the importance of strengthening its presence at the centre of one the world's greatest copper prospects.

For once, Mongolia is next-door neighbour to China, the world's No.1 copper consumer. The country is also a known source of untapped mineral riches, which — despite policy uncertainty brought by its young democracy – has managed to attract foreign investors.

By opening the Mongolian office, which will expand to 80 staff over the course of this year, Rio also hopes to put down deeper roots in the country, where it’s already carrying out fresh exploration aimed at finding the “next Oyu Tolgoi.”

The company is also in the midst of executing a $5.3 billion underground expansion of the giant copper-gold operation, which will allow it to produce 560,000 tonnes of copper a year, along with gold and silver by-products.

"Mongolia is one of Rio Tinto's most strategically important markets and we are here to stay," Rio Tinto Chief Executive Jean-Sebastien Jacques said in the statement. "We are demonstrating the deepening of our commitment to Mongolia through the establishment of a new country office under new Mongolian leadership."

Jacques added that Munkhtushig Dul would be Rio’s country director, leading the new Rio Tinto office. Munkhtushig will work in coordination with the Oyu Tolgoi LLC team, led by managing director Armando Torres, he said.

Rio Tinto bets big on Mongolia, opens local office

Munkhtushig Dul has been appointed as Rio Tinto’s country director and will lead the new office in Ulaanbaatar. (Image courtesy of Rio Tinto.)

Since 2010, Rio Tinto has invested in the country more than $7 billion, including salaries, supplier payments, as well as taxes and royalties.

While Oyu Tolgoi is the country's highest profile mining operation, Mongolia hosts a number of other copper, gold and coal mines and projects, including Canada’s Erdene Resource Development (TSX:ERD), the company that literally struck gold last year after finding its new gold project was richer than previously thought.

Australian explorer Xanadu Mines (ASX:XAM) is also among the established companies in Mongolia, with its underway Kharmagtai copper-gold project, south-east of Ulaanbaatar, returning exceptional results in the first months of this year.

Oyu Tolgoi is jointly owned by the government of Mongolia (34%) and Turquoise Hill (66%), of which Rio Tinto owns 51%.