Rio Tinto restarts negotiations with Mongolia over Oyu Tolgoi
Rio Tinto (ASX, LON, NYSE: RIO) has resumed negotiations with Mongolian authorities over a $5 billion underground expansion of the company’s flagship Oyu Tolgoi copper and gold mine, Xinhua news agency reports.
The Asian nation, owner of 34% of Oyu Tolgoi, has been at loggerheads with Rio-controlled Turquoise Hill (TSX:TRQ), which owns the remainder of the mine, for months.
Other than ownership issues, cost overruns, employment and pay of Mongolian workers, contractors and corporate governance, taxation and the repatriation of earnings, remain among the sticking points that Oyu Tolgoi new CEO, Craig Kinnell, vowed to address as soon as he took over Cameron McRae on Oct. 1.
During the meetings that began today, Kinnell is likely push for an end of some of the several points of dispute that have caused the Asian country's foreign direct investment (FDI) to fall 41% and forced Rio to halt the development of the underground portion of the mine, estimated to hold 80% of Oyu Tolgoi's value.
At full tilt, the mine is set to produce more than 1.2 billion pounds of copper worth over $4 billion at today's prices, 650,000 ounces of gold ($800 million) and 3 million ounces of silver (under $100 million) each year.
Oyu Tolgoi, 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.