Rio Tinto not shipping copper from Oyu Tolgoi any time soon: report
Despite the invitations sent to local and international media to attend Friday a ceremony marking the starting of copper shipments from Rio Tinto’s (ASX, LON, NYSE: RIO) $6.6 billion Oyu Tolgoi mine in Mongolia, the giant miner said it is not happening tomorrow.
According to sources familiar with the situation and quoted by Reuters, Rio can’t go ahead until gets final clearance from the government, which might happen by the end of June.
Other companies and investors are closely watching the opening of Oyu Tolgoi, as fears about copper supply continue to spread. They are triggered by recent stoppages at three major copper producers: Freeport-McMoRan Copper & Gold’s (NYSE: FCX) Grasberg mine in Indonesia, Rio Tinto’s (ASX, LON: RIO) Bingham Canyon mine in the US, and China’s Jinchuan Group Gansu copper plant.
Turquoise Hill Resources (NYSE,TSX:TRQ), the owner of the massive copper-gold mine in Mongolia, which is controlled by Rio Tinto, has been locked in often bitter negotiations with the government of Mongolia about the future of Oyu Tolgoi (turquoise hill in the vernacular) for months.
Mongolia owns 34% of Oyu Tolgoi located in the South Gobi desert and has taken Rio to task over cost overruns pegged at some $2 billion. Rio for its part threatened to halt construction if an agreement could not be reached and according to Walsh, now long-term budget for the mine, which has been operating on a month-to-month basis, has been agreed upon.
Both sides have called the ongoing talks centred on funding for a $5 billion expansion of the existing open pit mine, the use of Mongolian contractors and workers and a new royalty regime, “constructive,” and relations between the miners and the government of the Asian nation has gone through rough patches before.
Mongolia has long coveted a bigger slice of Oyu Tolgoi and has twice in the past couple of years floated proposals to take majority control of the mine which at full production would constitute as much as 30% of the Asian nation’s economy by 2020.
The mine is set to produce more than 1.2 billion pounds of copper, 650,000 ounces of gold and 3 million ounces of silver each year if built to capacity.
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